Lessons from an insurance approach to welfare

When Cabinet appointed a working group in 2010 to carry out a fundamental review of New Zealand’s welfare system, MartinJenkins was well placed to advise the group on lessons from insurance and ACC that could improve the system’s performance.

We have a deep understanding of insurance and actuarial principles, including how they can be applied to a range of public policy areas such as risk in the building and housing sectors. To assist the welfare working group, we compared an insurance approach with the traditional welfare approach, contrasting the outcomes of the two different approaches and also the operational differences. Drawing on ACC as a case study, we identified the key principles and practices from the insurance field that could be used to improve the welfare system’s performance. We then identified and evaluated a number of high-level options for achieving this.

The working group drew heavily on our work in its final report, and the changes we recommended were important in driving welfare reform. Examples of the influence of an insurance approach can be seen in the importance now placed on developing risk measures for cases where people are on benefits for long periods, and on understanding the “long tail” impact in those cases. There is also now a greater focus on targeting resources to address those risks and reduce long-term disadvantage.