ACC shortfall risk for self-employed

Valuable insurance option isn’t well promoted, writes

Only one in eight self-employed business owners have opted to specify what weekly compensation ACC would pay them, if they were injured and could no longer work.

And Kevin Smee from financial adviser network MySolutions says it’s time for government action to give the self-employed the same certainty over weekly compensation that salaried workers enjoy.

Smee estimated that just 50,000 of around 400,000 eligible business owners had specified an ‘‘agreed value’’ through ACC’s CoverPlus Extra.

Weekly compensation payments to self-employed people are based on their recent earnings, unless they have nominated an agreed value through ACC.

‘‘As the income of the selfemployed can fluctuate, they can be grossly under-insured in some years while in other years they are paying for ACC cover at a level that they don’t want, don’t need or can’t afford,’’ Smee said.

Smee said CoverPlus Extra gave the self-employed certainty in terms of costs and cover, and let them pay in advance.

The main reason so few business owners had opted for CoverPlus Extra was that it was not well promoted, Smee said.

‘‘The Government needs to put more resource into CoverPlus Extra and getting it out to the selfemployed,’’ he said.

‘‘We would suggest even making it the default contract for the self-employed. Small and medium- sized enterprises are the backbone of our economy, so there needs to be more effort to help these business owners.’’

‘‘It is simply not good enough that only one in eight eligible businesses are using it,’’ Smee said.

CoverPlus Extra is advertised on the entry page to the ‘‘selfemployed’’ section of its website, which links to a brochure outlining how it works.

Smee said CoverPlus Extra also resulted in fairer ACC levies in some cases.

‘‘If you have a family business in the building industry, the husband, who goes out and builds, and his wife, who manages the administration, both get billed by ACC as builders. CoverPlus Extra allows you to split classification within a company, meaning the administration person pays administration fees,’’ Smee said.

A Human Rights Review Tribunal case from 2009 illustrates what can happen if sum insured is not nominated.

In that case David Alderson complained that ACC had breached his human rights by not alerting him to CoverPlus Extra.

He moved to New Zealand from the UK in 2002, and went selfemployed in May 2005. Six months later he suffered a serious accident.

‘‘Because of his comparatively modest earnings in the period immediately before the accident he was only entitled to a low rate of earnings-related compensation’’, the tribunal said. ‘‘He says if he had organised his affairs differently, for example by taking out . . . CoverPlus Extra, he would have been entitled to very much more.’’

Alderson claimed recent immigrants like him were at a disadvantage in not knowing the ACC system.

The tribunal found ACC had not breached his human rights.