NEW ZEALAND GAZETTE, No. 42 — 20 APRIL 2017

Motor Vehicle Account

Average levy rate per vehicle

$113.94

The Accident Compensation Scheme

ACC is a Crown agent providing comprehensive, no-fault personal injury cover to all New Zealand residents and visitors to New Zealand.

ACC cover is managed under five separate Accounts, and ACC collects levies to fund three of these: the Motor Vehicle, Work and Earners’ Accounts.

The Motor Vehicle Account covers claims for all injuries that happen on public roads involving moving motor vehicles.

The average Motor Vehicle levy is the rate that all vehicle owners would pay if ACC charged a flat levy rate. The actual rate a vehicle owner pays differs from the average rate depending on their vehicle’s type.

For petrol-driven-vehicles, vehicle owners pay their levy through:

• a levy collected as part of the motor vehicle licensing fee (or “registration”); and
• a levy on the petrol they buy.

For non-petrol-driven vehicles, owners pay their entire levy through their registration. The levy component of the vehicle licence fee is higher for non-petrol-driven vehicles by an amount equivalent to the average petrol levy. The Regulations also prescribe a Motorcycle Safety Levy (MSL) payable in respect of motorcycles and mopeds. The Motorcycle Safety Advisory Council oversees the MSL fund, which is used to fund initiatives to improve the safety of motorcyclists.

The Levy-Setting Process

Motor Vehicle Account levies are set by regulation under the authority of sections 213, 244, 329 and 333 of the Act.

ACC reviews the expected costs of the levied Accounts to determine the levy rates required to meet the lifetime cost of claims in the upcoming period, along with funding adjustments to move each Account towards its funding target. The ACC Board (“Board”) undertakes public consultation before recommending levy rates to the Minister for ACC.

Cabinet sets the levy rates for the forthcoming levy period after considering the Board’s recommendations, along with the public interest as required by section 300 of the Act.

Principles of Financial Responsibility in Relation to the Levied Accounts

Section 166A of the Act requires the cost of all claims under the levied Accounts to be fully funded. To achieve full funding when setting levies, section 166A requires the Minister for ACC to have regard to the following principles:

• The levies derived for each levied Account should meet the lifetime costs of claims made during the levy year.
• If an Account has a deficit or surplus of funds to meet the costs of claims incurred in past periods, that surplus or deficit is to be corrected by setting levies at an appropriate level for subsequent years.
• Large changes in levies are to be avoided.

These principles provide guidance on how to balance the trade-off between funding stability and levy stability.

The Government’s Funding Policy

The funding policy issued by the Minister for ACC on 10 May 2016 (outlined below) specifies how ACC is to balance these principles when recommending levies for each levied Account consistent with the funding policy.

The funding policy requires that:

• Levy rates must be based on the estimated lifetime costs of claims expected to occur during the levy period (new-year claim costs);
• Accounts will aim to hold assets between 100% and 110% of the outstanding claims liability, with a midpoint funding ratio target of 105%;
• A funding adjustment must be included that takes each Account’s funding position to the 105% target smoothly over a 10-year horizon; and
• Any increase to the levy rates for each Account must not exceed 15% (in addition to the Labour Cost Index).