Is ACC Holding Back New Zealand’s Productivity—and What Needs to Change

Why injury management matters more than you think

New Zealand’s Accident Compensation Corporation (ACC) plays a crucial role in supporting Kiwis when they get injured. But there’s a growing concern that this well-meaning, state-run system may be doing more harm than good to the economy’s overall productivity. This article explores how the ACC scheme affects national output, the hidden cost of injuries, and how delays in rehabilitation are causing major economic losses.

Is a slow-moving system meant to help people get back to work is instead dragging down businesses, workers, and the country’s productivity?

Injuries and lost work: The scale of the problem

In 2023, more than 18.5 million workdays were lost to injuries in New Zealand. That’s equivalent to thousands of homes not being built, millions of bricks not being laid, and countless tasks left unfinished across multiple industries.

Whether the injury happens on a building site or while playing sport on the weekend, the outcome is the same: lost output, delayed projects, and lower morale among co-workers. Around two-thirds of ACC’s weekly compensation claims come from injuries that happen outside of work.

These injuries take longer to heal—about 90 days on average, compared to 60 days for work-related injuries.

What makes things worse is that after just 20 days off work, the chances of an injured person returning to their job drop to 70%. After 70 days, that falls to only 35%. The longer someone stays away, the less likely they’ll return—costing employers experience, money, and continuity.

An expensive system with weak incentives

The ACC pays out 80% of a person’s pre-injury income while they are off work. On the surface, this is generous and supportive. But critics argue that it also reduces the incentive for individuals to return to work quickly—especially when rehabilitation support is slow to arrive.

What’s more concerning is that ACC appears to have prioritised these weekly payments over the actual rehab that helps people recover. Between 2017 and 2024:

• Spending on weekly compensation rose by 68%

• Claims increased by 33%

• Spending on rehabilitation services rose by only 17%

This mismatch means more people are being paid to stay at home while receiving less support to return to work. On average, the amount spent per rehab claim actually dropped from $1,714 to $1,512—before accounting for inflation. Fewer resources and slower support make it harder for people to recover and get back on the job.

A flawed case management model

A key factor behind longer recovery times is ACC’s change to its case management system. In 2019, it scrapped one-on-one case management in favour of a call centre-based model. This made it harder for rehabilitation providers to access funding and support their clients. Phone queues were long, approvals were delayed, and personalised care all but disappeared.

Delays increased sharply. In 2018, the median wait between injury and referral to rehab was 70 days. By 2021, that had ballooned to 120 days. At the same time, the average time people spent on weekly compensation went from 10 weeks to 22 weeks.

As a result, injured workers spent more time in pain and without income support tailored to their needs. Providers couldn’t afford to offer quality rehab under the new funding caps—falling from $7,000 to $3,500 per case. Combined with workforce shortages in the health sector, the result was a broken system with little chance of quick recovery.

The impact on national productivity

The cost of these problems isn’t just personal—it’s national. A worker not at work produces nothing. Until rehab starts, their productive value to the economy is effectively zero. Even during rehab, it takes time to regain full capacity.

According to Business NZ’s estimates, the total loss of productive capacity in 2023/24 alone was around $12.2 billion. If the ACC had maintained its previous level of rehab support and management, this loss could have been just $6.5 billion.

While some of the workload can be backfilled by others—through overtime or extra shifts—this isn’t always possible, especially in a tight labour market. Even when it is, the stress and cost to businesses increase.

Too easy to claim, too hard to recover?

The fact that ACC is a state-run monopoly with compulsory funding from employers, employees, and vehicle owners means it faces limited accountability. Unlike private insurers, there’s no competition pushing it to improve service or efficiency. With no financial penalty for delays, ACC has little incentive to speed up recovery or reduce long-term dependence on weekly compensation.

This lack of urgency hurts productivity in several ways:

• People stay off work longer

• Fewer workers are upskilled or retained

• Business costs rise, limiting investment in other areas

• Wages and job growth are held back

In a country already struggling with low capital intensity and slow innovation—as outlined in the IMF’s 2025 productivity report—ACC’s inefficiencies are holding back progress even further.

What about larger employers? Enter the AEP

The Accredited Employers Programme (AEP) offers an alternative for bigger businesses. It allows them to manage their own injury claims, offering more control and quicker return-to-work outcomes. Employers in this scheme can avoid some levy increases and reduce disruptions.

However, the AEP is not for everyone. Smaller businesses may not have the systems or staff needed to manage rehab properly. Still, for companies that can join, the AEP provides a way to sidestep ACC’s inefficiencies and take charge of their own productivity.

Reform is not just possible—it’s necessary

The ACC system doesn’t need to be scrapped, but it does need to change. Experts suggest two key fixes:

1. Return to personalised case management – One-on-one rehab support ensures faster recovery and fewer delays.

2. Boost rehab funding – Adjust the funding levels to match inflation and rising injury claims, so people can get the support they need to recover quickly.

These changes would reduce long-term dependency, improve health outcomes, and restore lost productivity. More importantly, they would make ACC a true enabler of recovery—not just a passive payer of compensation.

A better system means a better economy

ACC has a vital role to play in protecting New Zealanders. But when the system may have become too focused on payouts and not enough on recovery, holding back people, businesses, and the economy as a whole.

With $12.2 billion in lost productive capacity in just one year, there’s too much at stake to ignore. By fixing delays, restoring one-on-one care, and investing in meaningful rehab, New Zealand can unlock the full potential of its workforce and finally begin to close the productivity gap.

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