Dear Rory Cobb,

 

Please find enclosed a response to your request concerning levy experience
rating modifiers and formulas.

 

Yours sincerely

 

       
  Government Services ACC
 
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Good afternoon Mr Cobb

 

Thank you for your further correspondence of 14 April 2017 in relation to
our response of 21 March 2017 to your Official Information Act request of
22 February 2017.

 

Your request of 22 February refers to the calculation of levy year
experience rating modification. This is one component of assessing levies
under the experience rating programme for employers whose ACC levy is
$10,000 or more per year over three consecutive years (qualifying class 2
levy payers).

 

The formulas used for calculating levies for qualifying class 2 levy
payers are provided in sections 12 to 17 of the Accident Compensation
(Experience Rating) Regulations 2016 (regulations). The link to the
regulations is provided in our letter of 22 March 2017.

 

We acknowledge that the calculations set out in those sections are not
straightforward. However, I can note the following about the experience
rating modification (ERM):

·         The ERM can affect an employer’s levy by up to +60%/-35%

·         It is worked out by comparing an individual employer’s claims
experience (i.e. weekly compensation days and claim numbers) to that of
all other employers in their industry peer group

·         The calculations that are used to make those comparisons are
provided by section 15 of the regulations.

 

To assist you, I have attached some explanatory notes on the ERM
calculations, which have come from an internal ACC document.

 

Calculations compare individual employers to those in their industry peer
group

As indicated above, the level of discount/loading calculated for the ERM
is determined by comparing the claims experience of an individual employer
to others in their industry peer group. Generally speaking, if an employer
has a low number of claims and weekly compensation days compared to their
industry peers, then that employer will get a discount on their levy.
Conversely, an employer with comparatively high numbers will receive a
loading.

 

Therefore, an employer’s ERM is not determined on their company’s weekly
compensation days and claim numbers alone. It requires comparing that
employer’s results to all other employers in its industry peer group.

 

You will appreciate that injury rates for individual employers can
improve, remain stable or worsen over time. The same can be true for
industry peer groups. The relative performance of individual employers and
industry peer groups can result in numerous scenarios.  For example:

·         if an employer’s claims experience remains stable while the
industry as a whole improves, then the individual employer’s ERM will tend
to increase (resulting in a higher levy); or

·         if an employer’s claims experience continually improves, while
their industry peer group’s results remain stable, then that employer’s
ERM will tend to decrease (resulting in lower levies).  

 

The degree of increase or reduction will depend on the relative difference
in the claims experience results.

 

Please contact us if you have further queries

We appreciate that this is a complex subject. If you have further
questions on this matter, we can arrange for you to have a conversation
with a technical expert on ACC levy calculations. If this is something you
would find helpful, please email your contact details to us at
[1][email address].

 

Regards

 

 

Government Services

ACC

 

 

 

Disclaimer:

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