ACC announces $7.2 billion deficit

• ACC records $7.2 billion deficit, compared to last year's $911 million surplus
• The deficit was largely driven by an $8.7b increase in the expected future costs of injury claims on ACC's books
• ACC blames court decisions, higher costs and volumes and declining rehabilitation performance
• It recently proposed to increase levies

The Accident Compensation Corporation slumped to a $7.2 billion full-year deficit, as the scheme blames court decisions for expanding its boundaries, and as it expects higher costs.

The huge bottom line deficit was largely driven by an $8.7b increase in ACC's Outstanding Claims Liability (OCL) calculation to $60.2b. The OCL represented the expected future costs of injury claims on ACC's books.

The result marked a big turnaround from the previous year's $911 million surplus.

"[The OCL increase was] a result of court decisions which have expanded scheme boundaries, expected increases in claim volumes and costs of claims, and ACC's declining rehabilitation performance, which was partly offset by the impact of discount rates and inflation," it said.

ACC emphasised the deficit did not affect its ability to cover the cost of providing services.

"However, higher than expected OCL increases indicate the costs to support clients are rising faster than expected, which could result in shifting higher costs onto future generations," it said.

ACC's claims costs exceeded budget by $176 million largely due to higher weekly compensation costs.

It recently proposed to increase levies to cover future injury costs, saying the number of injuries has been rising, as has the cost of treating them, and rehabilitation.

Aside from levies, ACC also earns revenue through its investment fund, which grew to $51.6b, up from $47.4b last year, driven by a 7.6 percent return.

Chief executive Megan Main said while court decisions and economic factors were beyond its control, ACC was focused on improving rehabilitation performance and controlling costs.

The court cases involved the treatment of victims of sexual abuse, which pushed back the date from which claims would start from, and also treatment for those affected by foetal abnormalities.

Main said more injuries required time off work during recovery, and injured workers were unable to work for longer.

The cost of services ACC provided to support recovery has also increased significantly over the past three years, driving the increase in the average cost of claims, Main said.

"In line with international trends, short-term client rehabilitation performance has been declining for over a decade," she said.

"We have worked to more deeply understand drivers of our client rehabilitation performance and have a three-year Investment Plan in place that targets short-term improvements as well as systemic longer-term changes."