ROAD ACCIDENT FUNDROAD ACCIDENT FUND

COMMISSIONCOMMISSION

Significance of Road Accident Benefits

900 000 vehicles in road accidents

130 000 injuries and 10 000 deaths

R2.7bn raised by fuel levy

80 000 loss occurrence events/150 000 claims

Transaction costs = known R620m + unknown costs

Further costs – pain and suffering, lost productivity, healthcare burden, duplication of pensions

900 000 vehicles in road accidents

130 000 injuries and 10 000 deaths

R2.7bn raised by fuel levy

80 000 loss occurrence events/150 000 claims

Transaction costs = known R620m + unknown costs

Further costs – pain and suffering, lost productivity, healthcare burden, duplication of pensions

Mandate

To inquire into and to make recommendations regarding a reasonable, equitable, affordable and sustainable system, for the payment by the Road Accident Fund of compensation or benefits, or a combination of compensation and benefits, in the event of the injury or death of persons in road accidents in the Republic

p.XI, p.2

To inquire into and to make recommendations regarding a reasonable, equitable, affordable and sustainable system, for the payment by the Road Accident Fund of compensation or benefits, or a combination of compensation and benefits, in the event of the injury or death of persons in road accidents in the Republic

p.XI, p.2

Reasonable (p.10)

A reasonable system of road accident compensation should acknowledge the symbiotic relationship of road accident compensation with the broader system of social security and its objectives. There should be moderation without extremes of generosity or meanness. The system should be sensible in its ambitions and reflective of both the needs and resources of the South African society in which it is founded. The system should be purposive in conception and not a piecemeal mixture of legislative amendment.

A reasonable system of road accident compensation should acknowledge the symbiotic relationship of road accident compensation with the broader system of social security and its objectives. There should be moderation without extremes of generosity or meanness. The system should be sensible in its ambitions and reflective of both the needs and resources of the South African society in which it is founded. The system should be purposive in conception and not a piecemeal mixture of legislative amendment.

Equitable (p.11)

A system of road accident compensation must be equitable in that there must be proportionality between the funding of the system and the demands made thereon. There should be impartial and unbiased treatment of road accident victims and their families. The purpose and effect of such a system should be supportive of justice and fairness as between road accident victims and their families. There should be some balance or congruence between the benefits made available to road accident victims and the benefits made available to other South Africans in need.

A system of road accident compensation must be equitable in that there must be proportionality between the funding of the system and the demands made thereon. There should be impartial and unbiased treatment of road accident victims and their families. The purpose and effect of such a system should be supportive of justice and fairness as between road accident victims and their families. There should be some balance or congruence between the benefits made available to road accident victims and the benefits made available to other South Africans in need.

Affordable (p.10)

An affordable system of road accident compensation should be within the financial means of road users and South African society as a whole. The system (in its funding demands, administration costs and social security benefits) must provide value to road users in South African society.

An affordable system of road accident compensation should be within the financial means of road users and South African society as a whole. The system (in its funding demands, administration costs and social security benefits) must provide value to road users in South African society.

Sustainable (p.10)

A sustainable system of road accident compensation must be efficient in its accessibility and administration. The system should be facilitative of health care and rehabilitation as also the alleviation of financial hardship and anxiety. There should be reinforcement of the broader system of social security which in turn should be supportive of road accident compensation. Any such system must be long lasting in its availability to road accident victims who are reliant thereon. Accordingly the system must remain financially and morally viable in the eyes of all South African society.

A sustainable system of road accident compensation must be efficient in its accessibility and administration. The system should be facilitative of health care and rehabilitation as also the alleviation of financial hardship and anxiety. There should be reinforcement of the broader system of social security which in turn should be supportive of road accident compensation. Any such system must be long lasting in its availability to road accident victims who are reliant thereon. Accordingly the system must remain financially and morally viable in the eyes of all South African society.

Questions

Is there any rationale for the intervention of the State in the fate of the victims of road accidents in a manner more advantageous to them than to victims of violent crime, birth defects or household accidents? p.11

In the event that rationale is found to justify legislative intervention and State regulation of a system of compensation of benefits to the victims of road accidents then: For whose benefit does the State intervene? Is intervention for the benefit of negligent vehicle drivers or for the benefit of victims and survivors of road accidents? p.12

Is there any rationale for the intervention of the State in the fate of the victims of road accidents in a manner more advantageous to them than to victims of violent crime, birth defects or household accidents? p.11

In the event that rationale is found to justify legislative intervention and State regulation of a system of compensation of benefits to the victims of road accidents then: For whose benefit does the State intervene? Is intervention for the benefit of negligent vehicle drivers or for the benefit of victims and survivors of road accidents? p.12

Questions

Should such intervention be viewed as a system of insurance or part of State administered social security benefits?

Should State intervention be limited to facilitation of funding a system of road accident compensation or should the State be concerned with the establishment of a structure to administer provision of compensation or benefits?

p.12

Should such intervention be viewed as a system of insurance or part of State administered social security benefits?

Should State intervention be limited to facilitation of funding a system of road accident compensation or should the State be concerned with the establishment of a structure to administer provision of compensation or benefits?

p.12

Questions

What should be the nature of any compensation or benefits made available to victims of road accidents?

What should be the extent of compensation or benefits?

To what extent should a system of road accident compensation be integrated within the provision of other social security benefits?

p.12

What should be the nature of any compensation or benefits made available to victims of road accidents?

What should be the extent of compensation or benefits?

To what extent should a system of road accident compensation be integrated within the provision of other social security benefits?

p.12

Stakeholders p.99

Road user

Taxpayer

Government

(other role players = agents; servants; facilitators)

Road user

Taxpayer

Government

(other role players = agents; servants; facilitators)

Outline of Report: Volumes 1 & 2

Current situation: chapters 3 – 14

Policy issues: chapters 15 – 25

Current compensation & proposed benefits:

chapters 26 – 36

Delivery: chapters 37 – 42

Table of Contents

Current situation: chapters 3 – 14

Policy issues: chapters 15 – 25

Current compensation & proposed benefits:

chapters 26 – 36

Delivery: chapters 37 – 42

Table of Contents

Research Results: Volume 3

“Analysis of claims finalized by the RAF in 1998/1999”: Human Sciences Research Councilp.21

“Analysis of road accident injuries 1998/1999”: Medical Research Council p.217

“Research into lump sum payments of compensation to road accident victims”: Strategy & Tactics p.407

“AMA Guides case studies”: Dr D Fish p.481

“Analysis of claims finalized by the RAF in 1998/1999”: Human Sciences Research Councilp.21

“Analysis of road accident injuries 1998/1999”: Medical Research Council p.217

“Research into lump sum payments of compensation to road accident victims”: Strategy & Tactics p.407

“AMA Guides case studies”: Dr D Fish p.481

Research Results: Volume 3

“ICF case studies”: World Health Organization p.497

“Impact of HIV/AIDS on road accident benefits”: Centre for Actuarial Research p.531

“The cost of healthcare for road accident victims at public hospitals”: Dr J Herbst /MRC p.547

“Actuarial valuation of recommendations”: NMG-Levy Actuaries p.569

“ICF case studies”: World Health Organization p.497

“Impact of HIV/AIDS on road accident benefits”: Centre for Actuarial Research p.531

“The cost of healthcare for road accident victims at public hospitals”: Dr J Herbst /MRC p.547

“Actuarial valuation of recommendations”: NMG-Levy Actuaries p.569

Current Scheme

Road Use: chapters 3 – 5 pp. XII, 37-101

Claims and Compensation:chapters 6 – 8 pp.XIV, 101-179

Funding: chapters 9 – 11 pp.XV, 179-277

Transaction Costs: chapter 12 pp.XV, 277-309

Abuse: chapter 13 pp.XVI, 309-349

Evaluation: chapter 14 pp.XVI, 349-373

Road Use: chapters 3 – 5 pp. XII, 37-101

Claims and Compensation:chapters 6 – 8 pp.XIV, 101-179

Funding: chapters 9 – 11 pp.XV, 179-277

Transaction Costs: chapter 12 pp.XV, 277-309

Abuse: chapter 13 pp.XVI, 309-349

Evaluation: chapter 14 pp.XVI, 349-373

Current Scheme of Compensation

Levy on fuel (18,5c/l) to RAF

Motorist at fault

Innocent victim claims compensation

Compensation = medical expenses, funeral expenses, loss income/support, general damages

Once-and-for-all lump sum compensation

Compensation unlimited

Wrongdoing motorist indemnified

Levy on fuel (18,5c/l) to RAF

Motorist at fault

Innocent victim claims compensation

Compensation = medical expenses, funeral expenses, loss income/support, general damages

Once-and-for-all lump sum compensation

Compensation unlimited

Wrongdoing motorist indemnified

Urban – South Africa

Rural Areas – South Africa

Rose

The home of Rose

The backyard

Bedsores

Evaluation p.350

Failure to claim from the RAFIgnorance of the RAF Ability to claim Exclusion by

fault

The claims processDelay Transaction costs

Inconvenience Prospects of success

CompensationExclusion Cause above need Unequal

treatment Allocation NatureMore to the wealthy Financing

DeliveryConsumer experience

Failure to claim from the RAFIgnorance of the RAF Ability to claim Exclusion by

fault

The claims processDelay Transaction costs

Inconvenience Prospects of success

CompensationExclusion Cause above need Unequal

treatment Allocation NatureMore to the wealthy Financing

DeliveryConsumer experience

Evaluation p.367

Exclusion (pp.368, 373 – 427)

Fault (pp.369, 513 – 584)

Allocation of compensation (pp.369, 160 – 177)

Unlimited compensation (pp.370, 160 – 177, 428 – 467)

Transaction costs (pp.370, 277 – 307, 309 – 348)

Lump sum payments (pp.371, 585 – 664)

Delivery (pp.136-160, 351-357, 360-367, 546-553, 616-637, 1183-1285)

Exclusion (pp.368, 373 – 427)

Fault (pp.369, 513 – 584)

Allocation of compensation (pp.369, 160 – 177)

Unlimited compensation (pp.370, 160 – 177, 428 – 467)

Transaction costs (pp.370, 277 – 307, 309 – 348)

Lump sum payments (pp.371, 585 – 664)

Delivery (pp.136-160, 351-357, 360-367, 546-553, 616-637, 1183-1285)

(Figure 10.6: Total petrol and diesel consumption in South Africa and RAF income from the fuel levy: – p.223: Source: SAPIA

Annual Report 2001 & RAF Annual Reports)

0

2,000

4,000

6,000

8,000

10,000

12,000

Lit

res

( M

illio

ns

)

0

500

1,000

1,500

2,000

2,500

Ran

ds

(M

illio

ns

)

Petrol 10,566 10,798 10,883 10,861 10,396 10,578

Diesel 5,759 5,875 5,959 5,993 6,254 4,697

Fuel levy income 1,244 1,439 1,764 2,183 2,151 2,165

1996 1997 1998 1999 2000 2001

(Figure 8.9: Distribution of claims paid according to extent of injury – p.171: Source: HSRC Report)

(Figure 26.3: Injuries with the highest impact on the compensation system – p.802 )

Amputation of forearmFracture of ribsSprain and strain of back

Dislocation of backFracture pelvisFracture upper leg

Fracture of upper backIntracranial injurySuperficial injury to face

Amputation of footFracture of upper legSuperficial injury to head

Fracture vertebral column

Fracture lower legFracture lower leg

Injuries to nerves & spinal cord

Sprain & strain of the neck

Sprain & strain of the neck

Greatest Compensation Paid to Individual Claimants

Greatest Expenditure on Compensation by

Injury Category

Most Frequent Injury

CBA

Distribution of Claim SizeDistribution of Claim Size

0

3

5

8

10

13

15

Tota

l Am

ount

(%)

0

10

20

30

40

50

60

Num

ber o

f Cla

ims

(%)

Total Amount 7.85 12.34 10.59 6.75 4.41 12.24 12.04 6.96 4.56 3.22 6.53 5.06 11.59 7.46

No. of Claims 48.57 23.11 11.42 5.30 2.66 4.76 2.31 0.77 0.35 0.19 0.29 0.16 0.45 0.13

<1000 - 9999

10 000 - 19 999

20 000 - 29 999

30 000 - 39 999

40 000 - 49 999

50 000 - 99 999

100 000 - 199 999

200 000 - 299 999

300 000 - 399 999

400 000 - 499 999

500 000 - 749 999

750 000 - 999 999

500 000 - 999 999

1 000 000 +

0

10

20

30

40

50

60

70

Past Medical 9.93 11.67 10.81 7.83 1.69

Future Medical 16.85 16.77 6.28 5.34 5.35

Past Earnings 3.52 4.72 6.09 5.64 6.18

Future Earnings 1.60 4.71 17.30 38.67 61.15

General Damages 64.67 49.41 26.99 2.89 0.72

Funeral Expenses 1.24 0.20 0.04

Past Support 1.12 5.68 8.15 6.07 3.85

Future Support 0.77 6.44 24.03 33.39 20.84

Other 0.29 0.41 0.32 0.16 0.23

0 - 20 000 20 000 - 50 000 50 000 - 200 000 200 000 - 400 000 400 000 -

Categories of compensation

(Figure 8.13: Distribution of compensation paid per (Figure 8.13: Distribution of compensation paid per compensation category 1999 – p.174: Source: HSRC Report)compensation category 1999 – p.174: Source: HSRC Report)

The Claims Process

“Time – it just took long to pay out.”

“The claim procedure is a mess and a waste of money.”

“I am still waiting for RAF to pay.”

“I had to struggle hard for six years to get anything back – our whole life changed. Atty can do nothing and will never be able to walk.”

"They’ve taken too long to settle the claim and I am still unaware about many things regarding the claim.”

Successful road accident compenstion claimants p.142-143

“Time – it just took long to pay out.”

“The claim procedure is a mess and a waste of money.”

“I am still waiting for RAF to pay.”

“I had to struggle hard for six years to get anything back – our whole life changed. Atty can do nothing and will never be able to walk.”

"They’ve taken too long to settle the claim and I am still unaware about many things regarding the claim.”

Successful road accident compenstion claimants p.142-143

Time Period (Figure 17.9 Average years from accident to settlement,

according to seriousness of injuries Vol.3, p.188)

(Figure 12.1 Utilisation of RAF Income: 1999) p.282

19991999

* Transaction costs:* Transaction costs: 483 - 21%483 - 21%

RAF Admin expensesRAF Admin expenses 129(6%) 129(6%) RAF (Legal & Experts) RAF (Legal & Experts) 125(5%) 125(5%) Claimants (Admin, Legal &Claimants (Admin, Legal & Experts)Experts) 227(10%)227(10%)

1002,285Total2,285

13298Surplus Transferred to Reserve

255Other

21483Transaction Costs *

641,449Compensation

%RmUtilisation of RAF Income

RAF Income (Fuel Levy & Investment)

R (million)

(Figure 12.1 Utilisation of RAF Income: 2001) p.283

20012001

* Transaction costs:* Transaction costs: 619 - 23%619 - 23%

RAF Admin expensesRAF Admin expenses 179(7%) 179(7%) RAF (Legal & Experts) RAF (Legal & Experts) 134(5%) 134(5%) Claimants (Admin, Legal &Claimants (Admin, Legal & Experts)Experts) 306(11%)306(11%)

1002,730Total2,730

256Other

23619Transaction Costs *

752,055CompensationUtilisation of Reserve

342

%RmUtilisation of RAF Income

RAF Income (Fuel Levy & Investment)

R (million)

2,388

Distribution & Transaction Costs

 

Total: R620 million (100%)Total: R620 million (100%) 

RAFRAF Total:Total:R313 million (50%)R313 million (50%)

  ClaimantClaimant Total: Total: R307 million (50%)R307 million (50%)

RAF Administrative ExpensesRAF Administrative ExpensesR179 million (27%)R179 million (27%)

 

CClaimantlaimant,,AdministrativeAdministrative

and Legal Representatives:and Legal Representatives:Attorneys and AdvocatesAttorneys and Advocates

R217 million (35%)R217 million (35%)

  RAF Capital ExpenditureRAF Capital Expenditure R4 million (1%)R4 million (1%)

RAF Attorneys and AdvocatesRAF Attorneys and AdvocatesR96 million (16%)R96 million (16%)

ExpertsExperts R34 million (6%)R34 million (6%)

ExpertsExpertsR90 million (15%)R90 million (15%)

    Attorney-Claimant AgreementAttorney-Claimant Agreement Administration; Legal; ExpertsAdministration; Legal; Experts

Unknown Unknown

p.284

Abuse

False False CClaimslaims

Exaggerated Exaggerated CClaimslaims

Opportunistic Opportunistic CClaimslaims

Fraud Fraud wwithin the RAFithin the RAF

Legal Legal MMalpracticealpractice

False False CClaimslaims

Exaggerated Exaggerated CClaimslaims

Opportunistic Opportunistic CClaimslaims

Fraud Fraud wwithin the RAFithin the RAF

Legal Legal MMalpracticealpractice

Chapter 13

Policy Issues

Social Security: chapters 15 – 17 pp.XIX, 373-467

Common Law Remedies: chapter 18 pp.XX, 468 - 503

Fault vs No-Fault: chapters 19&20 pp.XXI, 513-584

Lump Sum Awards vs Periodic Payments: chapters 21&22 pp.XXI, 585-668

Disability Assessment: chapter 23 pp.XXII, 669-703

Social Security: chapters 15 – 17 pp.XIX, 373-467

Common Law Remedies: chapter 18 pp.XX, 468 - 503

Fault vs No-Fault: chapters 19&20 pp.XXI, 513-584

Lump Sum Awards vs Periodic Payments: chapters 21&22 pp.XXI, 585-668

Disability Assessment: chapter 23 pp.XXII, 669-703

Policy Shifts

Liability Insurance Social Security

Premium Taxation

Fault No-Fault

Compensation Benefits

Lump Sums Pensions

Unlimited Defined

Liability Insurance Social Security

Premium Taxation

Fault No-Fault

Compensation Benefits

Lump Sums Pensions

Unlimited Defined

Fault vs “No-Fault”

Vindication and Vindication and RetributionRetribution

Liability InsuranceLiability Insurance

Incentive to SafetyIncentive to Safety

General DeterrenceGeneral Deterrence

PublicityPublicity

Vindication and Vindication and RetributionRetribution

Liability InsuranceLiability Insurance

Incentive to SafetyIncentive to Safety

General DeterrenceGeneral Deterrence

PublicityPublicity

Issues of Issues of PProofroof

Not Not AAlways lways HHuman uman EErrorrror

Standard of Standard of FFaultault

Contributory Contributory NNegligenceegligence

Reduction in Reduction in CCompensationompensation

Exclusion from Exclusion from CCompensationompensation

Complexity and Complexity and DDelayelay

Complexity and Complexity and CCostost

Chapter 19

Lump Sum Compensation vs Periodic Payment of Benefits

Promote Finality

Independence & Dignity of Claimant

Facilitate New Life Style

Inheritance for Beneficiaries

Funding Litigation

Guesswork and False Prophecies

Under Compensation

Over Compensation

Process of Calculation Increases Cost

Process of Calculation Causes Delay

HIV/AIDS

Utilization of Award

Chapter 21