The pending NZ Income Insurance Scheme Blog 4 of 4

Blog 4 - General Observations

In our last blog we discussed the impact of the New Zealand Income Insurance Scheme (NZIIS) on employers (click here). There is quite a bit and frustratingly we have more questions than answers. This blog is similar in that we dissect MBIE’s proposal and look at what isn’t covered.

You can access our first blog in the series (here) and our second blog covering the Impact on Employees (here)

For this blog, we aimed to look quite broadly with a healthy dose of cynicism. We hope you find this insightful.

The NZIIS scheme, in part is being justified on the back of the NZ Covid response. Given the current economic climate is more a response to overzealous government policies (i.e. high inflation, job losses, lack of workers), I am unsure if this is a good justification.

I believe, albeit anecdotally, the mood in the NZ business space would suggest if NZ took a similar approach to a pandemic that non-compliance may be a factor that the Government would need to deal with.

Of bigger concern is how the scheme will work with other entities both Government and private sector; and how ACC is placed to manage such a scheme given the well documented problems it is having with managing claims and weekly compensation in a timely manner and a host of IT challenges.

Below is a list covering questions and concerns we have regarding the NZIIS. They are in no particular order.

Industry Statistics: all employers (and employees) will need to contribute to the scheme. Some industries though like farming, often do not employ people or if they do, it may only be one or two staff. Equally, statistically, not many farm workers are ever made redundant. This would mean that the agriculture and other industries with similar profiles will end up subsidising worse performing industries.
Work & Income: the agency that deals with unemployment. It seems that there will be a substantial crossover between them and NZIIS. What will the transition be from NZIIS if the individual has not ‘moved on’ within the time period?
Private Insurance: is the Government suggesting that NZIIS takes over from private insurance by not recognising the role private insurance could play?
Insurance Legalities: it is unclear whether the NZIIS will be subject to the same rigour as private insurance companies with respect to the FMA and their actuarial assumptions, financial modelling underpinning the 1.39%, equity ratios, etc?
Mental Health: what will be the impact of mental health on the ability to work? The NZIIS documentation determines that a health condition or disability is a mental or physical condition that can limit person’s ability to continue their usual level of paid work. How would this be measured?
Work versus Non-Work: with health related claims, how will a distinction be created between what is work related and non-work related. Or is the intent for the employer and employee to start underwriting public health and the services we currently get and pay for via our existing taxes.
Labour Hire: how will this sector be impacted given that jobs can be of short-term duration with no guarantee of ongoing work?
Under Insurance: if the NZIIS is under insured, will that result in additional levies on workers and employers or will that be covered directly by taxes?
Vocational Rehabilitation: in 2009, ACC took a deliberate step to reduce the vocational providers from circa 350 down to 9. A number if not most also cover allied health (physiotherapists, occupational therapists, etc). The same providers are also used by Work & Income and private insurance companies. What is the bandwidth these organisations have to deal with an increase in demand?
Private Training Providers: the current vocational training space in NZ is going through a massive change with the merging of the polytechnics. How will this pan out and by when is unknown. Given that the NZIIS states directly that training is a requirement, it would be useful that this space was not in such a state of flux.
Governance: NZIIS will be overseen by 3 groups namely the NZ Council of Trade Unions, Māori representation, and BusinessNZ. This does not fill me with much glee. Given the NZIIS sits under ACC, which in turn is a Crown Agency with its own Board of Directors, what role do they play?
Other Costs: the proposals have not been clear as to how other costs such as health treatments, vocational rehabilitation, job search, etc are all going to be funded. Will the NZIIS turn into a recruitment agency of sorts to facilitate employment outcomes?
ACC Part 1: ACC will be charged to administer this scheme. For those who work with ACC you will understand why this gives us concern. The ACC is well behind in being able to manage claims and weekly compensation in a timely manner let alone take on a brand new scheme. Currently, the wait time for weekly compensation to be signed off is up to, and at times over 10 weeks. That is 2 ½ months… that would defeat the purpose of the NZIIS which is all about providing financial support to allow the individual to obtain new employment in line with their previous income levels and expectations.
ACC Part 2: for ACC to be involved, there will need to be a legislative change given its functions are clearly set out as it stands. This does not include administering the NZIIS although enabling legislation was passed to allow ACC to do preliminary work on systems, process, budget requirements, and the like.

Lastly, the NZIIS was meant to be rolled out late 2023, however, it would seem this timeline will not be met. So, is this all a waste of time, money and energy should Labour not retain power at the next election to be held late 2023?

ManageACCMarty WoutersJanuary 6, 2023acc, insurance

The pending NZ Income Insurance Scheme Blog 4 of 4

Blog 4 - General Observations

In our last blog we discussed the impact of the New Zealand Income Insurance Scheme (NZIIS) on employers (click here). There is quite a bit and frustratingly we have more questions than answers. This blog is similar in that we dissect MBIE’s proposal and look at what isn’t covered.

You can access our first blog in the series (here) and our second blog covering the Impact on Employees (here)

For this blog, we aimed to look quite broadly with a healthy dose of cynicism. We hope you find this insightful.

The NZIIS scheme, in part is being justified on the back of the NZ Covid response. Given the current economic climate is more a response to overzealous government policies (i.e. high inflation, job losses, lack of workers), I am unsure if this is a good justification.

I believe, albeit anecdotally, the mood in the NZ business space would suggest if NZ took a similar approach to a pandemic that non-compliance may be a factor that the Government would need to deal with.

Of bigger concern is how the scheme will work with other entities both Government and private sector; and how ACC is placed to manage such a scheme given the well documented problems it is having with managing claims and weekly compensation in a timely manner and a host of IT challenges.

Below is a list covering questions and concerns we have regarding the NZIIS. They are in no particular order.

Work & Income: the agency that deals with unemployment. It seems that there will be a substantial crossover between them and NZIIS. What will the transition be from NZIIS if the individual has not ‘moved on’ within the time period?

Private Insurance: is the Government suggesting that NZIIS takes over from private insurance by not recognising the role private insurance could play?

Insurance Legalities: it is unclear whether the NZIIS will be subject to the same rigour as private insurance companies with respect to the FMA and their actuarial assumptions, financial modelling underpinning the 1.39%, equity ratios, etc?

Mental Health: what will be the impact of mental health on the ability to work? The NZIIS documentation determines that a health condition or disability is a mental or physical condition that can limit person’s ability to continue their usual level of paid work. How would this be measured?

Work versus Non-Work: with health related claims, how will a distinction be created between what is work related and non-work related. Or is the intent for the employer and employee to start underwriting public health and the services we currently get and pay for via our existing taxes.

Labour Hire: how will this sector be impacted given that jobs can be of short-term duration with no guarantee of ongoing work?

Under Insurance: if the NZIIS is under insured, will that result in additional levies on workers and employers or will that be covered directly by taxes?

Governance: NZIIS will be overseen by 3 groups namely the NZ Council of Trade Unions, Māori representation, and BusinessNZ. This does not fill me with much glee. Given the NZIIS sits under ACC, which in turn is a Crown Agency with its own Board of Directors, what role do they play?

Other Costs: the proposals have not been clear as to how other costs such as health treatments, vocational rehabilitation, job search, etc are all going to be funded. Will the NZIIS turn into a recruitment agency of sorts to facilitate employment outcomes?

Lastly, the NZIIS was meant to be rolled out late 2023, however, it would seem this timeline will not be met. So, is this all a waste of time, money and energy should Labour not retain power at the next election to be held late 2023?