ACC warns climate change could drive more injury claims as extreme weather risks rise, reveals $7.23 billion deficit for 2024

The Accident Compensation Scheme (ACC) is anticipating climate-related factors will affect future claims.

The state insurer made this observation in its latest annual climate report, released alongside its annual report for the year to June 2024.

ACC board chair Tracey Batten and deputy chair David Hunt wrote in the climate report that climate change poses “significant” risks including increased frequency of extreme weather events that may impact the type of injuries New Zealanders experience. 

The pair said addressing these challenges would require a coordinated and informed approach.

The state insurer revealed a $7.23 billion deficit in the June-2024 financial year, driven by a 16% increase in injury services and compensation. ACC said the deficit had “exceeded” its budget expectations. 

ACC said the deficit was mainly driven by significant increases in the outstanding claims liability (OCL) calculation, which is the expected lifetime costs of supporting accidents that have already occurred.

"The recorded deficit does not affect ACC’s ability to cover the cost of providing all its services to New Zealanders. 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," ACC said.

In the 2023 financial year, ACC reported a $911 million surplus.

During the 2024 financial year, ACC said over two million injured people were paid out over $4 billion for treatment and rehabilitation services, and almost $3 billion of compensation payments.

ACC said in its 2024 climate report it believes climate-related factors have the potential to impact injury types, claim volumes, and access to treatment and rehabilitation services in the future.

The report found that ACC’s exposure to climate risk is “extremely broad”.

“Because injuries are caused by a wide range of factors, and occur in many different settings, it is challenging to understand how climate change will influence injuries in Aotearoa New Zealand,” the report said.

“Despite the inherent uncertainty, we recognise that by beginning climate modelling, we can collaborate more effectively across the health and wider public sector.”

ACC is a Crown entity. It was set up under the Accident Compensation Act 2001 in order to deliver the country’s accident insurance scheme with the purpose of delivering injury prevention initiatives and no-fault personal injury cover for everyone in NZ.

ACC said in its climate report that it had a responsibility to contribute to national planning for climate adaptation. It began a three-year programme of work back in 2023 to work on understanding the climate risks and opportunities that ACC could be exposed to in the short, medium and long-term.

“Climate risk is already included in our enterprise risk framework, and our existing monitoring of claims data helps us watch for climate-related impacts on injuries and rehabilitation,” ACC said.

“The current work programme extends this approach by developing a forward view that will help enable early adaptation and planning. The work will lead to a formal climate adaptation plan for ACC.”

ACC has set targets to reduce the carbon intensity of its investment portfolio by 60% by 2025 and 65% by 2030, compared to 2019 levels.