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ROAD ACCIDENT FUND COMMISSION

ROAD ACCIDENT FUND COMMISSION. Significance of Road Accident Benefits. 900 000 vehicles in road accidents 130 000 injuries and 10 000 deaths R2. 7 bn raised by fuel levy 80 000 loss occurrence events/150 000 claims Transaction costs = known R620m + unknown costs

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ROAD ACCIDENT FUND COMMISSION

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  1. ROAD ACCIDENT FUND COMMISSION

  2. 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

  3. 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 Mandate

  4. 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.

  5. 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.

  6. 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.

  7. 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.

  8. 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

  9. 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

  10. 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

  11. Stakeholders p.99 • Road user • Taxpayer • Government (other role players = agents; servants; facilitators)

  12. 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

  13. 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 Councilp.217 • “Research into lump sum payments of compensation to road accident victims”:Strategy & Tacticsp.407 • “AMA Guides case studies”:Dr D Fishp.481

  14. Research Results: Volume 3 • “ICF case studies”:World Health Organizationp.497 • “Impact of HIV/AIDS on road accident benefits”:Centre for Actuarial Researchp.531 • “The cost of healthcare for road accident victims at public hospitals”:Dr J Herbst /MRCp.547 • “Actuarial valuation of recommendations”:NMG-Levy Actuariesp.569

  15. Current Scheme Road Use: chapters 3 – 5pp. XII, 37-101 Claims and Compensation: chapters 6 – 8pp.XIV, 101-179 Funding:chapters 9 – 11pp.XV, 179-277 Transaction Costs: chapter 12pp.XV, 277-309 Abuse:chapter 13pp.XVI, 309-349 Evaluation:chapter 14pp.XVI, 349-373

  16. 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

  17. Urban – South Africa

  18. Rural Areas – South Africa

  19. Rose

  20. The home of Rose

  21. The backyard

  22. Bedsores

  23. Evaluation p.350 • Failure to claim from the RAF Ignorance of the RAF Ability to claim Exclusion by fault • The claims process Delay Transaction costs Inconvenience Prospects of success • Compensation Exclusion Cause above need Unequal treatment Allocation Nature More to the wealthy Financing • Delivery Consumer experience

  24. 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)

  25. (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)

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

  27. A B C Most Frequent Injury Greatest Expenditure on Compensation by Injury Category Greatest Compensation Paid to Individual Claimants Sprain & strain of the neck Sprain & strain of the neck Injuries to nerves & spinal cord Fracture lower leg Fracture lower leg Fracture vertebral column Superficial injury to head Fracture of upper leg Amputation of foot Superficial injury to face Intracranial injury Fracture of upper back Fracture upper leg Fracture pelvis Dislocation of back Sprain and strain of back Fracture of ribs Amputation of forearm (Figure 26.3: Injuries with the highest impact on the compensation system – p.802 )

  28. Distribution of Claim Size

  29. Categories of compensation

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

  31. “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 The Claims Process

  32. Time Period (Figure 17.9 Average years from accident to settlement, according to seriousness of injuries Vol.3, p.188)

  33. RAF Income (Fuel Levy & Investment) R (million) Utilisation of RAF Income Rm % Compensation 1,449 64 Transaction Costs * 483 21 Other 55 2 Surplus Transferred to Reserve 298 13 2,285 Total 2,285 100 (Figure 12.1 Utilisation of RAF Income: 1999) p.282 1999 * Transaction costs: 483 - 21% RAF Admin expenses 129(6%) RAF (Legal & Experts) 125(5%) Claimants (Admin, Legal &Experts) 227(10%)

  34. RAF Income (Fuel Levy & Investment) R (million) 2,388 Utilisation of RAF Income Rm % Utilisation of Reserve 342 Compensation 2,055 75 Transaction Costs * 619 23 Other 56 2 2,730 Total 2,730 100 (Figure 12.1 Utilisation of RAF Income: 2001) p.283 2001 * Transaction costs: 619 - 23% RAF Admin expenses 179(7%) RAF (Legal & Experts) 134(5%) Claimants (Admin, Legal &Experts) 306(11%)

  35. Total: R620 million (100%) RAFTotal: R313 million (50%)  ClaimantTotal: R307 million (50%) RAF Administrative Expenses R179 million (27%) Claimant, Administrative and Legal Representatives: Attorneys and Advocates R217 million (35%) RAF Capital Expenditure R4 million (1%) RAF Attorneys and Advocates R96 million (16%) Experts R34 million (6%) Experts R90 million (15%)  Attorney-Claimant AgreementAdministration; Legal; Experts Unknown Distribution & Transaction Costs p.284

  36. Abuse Chapter 13 • False Claims • Exaggerated Claims • Opportunistic Claims • Fraud within the RAF • Legal Malpractice

  37. Policy Issues Social Security: chapters 15 – 17pp.XIX, 373-467 Common Law Remedies: chapter 18pp.XX, 468 -503 Fault vs No-Fault:chapters 19&20pp.XXI, 513-584 Lump Sum Awards vs Periodic Payments: chapters 21&22pp.XXI, 585-668 Disability Assessment:chapter 23pp.XXII, 669-703

  38. Policy Shifts Liability Insurance Social Security Premium Taxation Fault No-Fault Compensation Benefits Lump Sums Pensions Unlimited Defined

  39. Vindication and Retribution Liability Insurance Incentive to Safety General Deterrence Publicity Issues of Proof Not Always Human Error Standard of Fault Contributory Negligence Reduction in Compensation Exclusion from Compensation Complexity and Delay Complexity and Cost Fault vs “No-Fault” Chapter 19

  40. 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 Lump Sum Compensation vs Periodic Payment of Benefits Chapter 21

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