1 road accident fund commission. 2 significance of road accident benefits 900 000 vehicles in road...

1

ROAD ACCIDENT FUNDROAD ACCIDENT FUND

COMMISSIONCOMMISSION

2

Significance of Road Accident BenefitsSignificance 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

3

MandateMandate

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

4

ReasonableReasonable (p.10)(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.

5

EquitableEquitable (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.

6

Affordable 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.

7

Sustainable 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.

8

QuestionsQuestions

a) 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

b) 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

a) 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

b) 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

QuestionsQuestions

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

d) 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

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

d) 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

QuestionsQuestions

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

f) What should be the extent of compensation or benefits?

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

p.12

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

f) What should be the extent of compensation or benefits?

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

p.12

11

StakeholdersStakeholders p.99p.99

Road user

Taxpayer

Government

(other role players = agents; servants; facilitators)

Road user

Taxpayer

Government

(other role players = agents; servants; facilitators)

12

Outline of Report: Volumes 1 & 2Outline 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

13

Research Results: Volume 3Research Results: Volume 3

“Analysis of claims finalized by the RAF in 1998/1999”: Human Sciences Research Council p.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 Fishp.481

“Analysis of claims finalized by the RAF in 1998/1999”: Human Sciences Research Council p.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 Fishp.481

14

Research Results: Volume 3Research 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

15

Current SchemeCurrent 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







16

Current Scheme of CompensationCurrent 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

17

Evaluation Evaluation p.350

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

The claims processDelay Transaction costs InconvenienceProspects of success

CompensationExclusion Cause above need Unequal

treatment Allocation Nature More 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 InconvenienceProspects of success

CompensationExclusion Cause above need Unequal

treatment Allocation Nature More to the wealthy Financing

DeliveryConsumer experience

18

Evaluation Evaluation p.367

3. Exclusion (pp.368, 373 – 427)

4. Fault (pp.369, 513 – 584)

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

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

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

8. Lump sum payments (pp.371, 585 – 664)

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

3. Exclusion (pp.368, 373 – 427)

4. Fault (pp.369, 513 – 584)

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

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

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

8. Lump sum payments (pp.371, 585 – 664)

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

19

Policy IssuesPolicy 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

20

Policy ShiftsPolicy 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

21

Object of Road Accident Benefits Object of Road Accident Benefits SchemeScheme

restoration of a life with dignity and

The Road Accident Benefits Scheme should provide

protection against impoverishment,

healthcare and rehabilitative intervention,

timeous, appropriate and effective

solace for suffering to road accident victims who have sustained serious injuries

with life changing consequences

or for the families of deceased road accident victims

22

BenefitsBenefits

Healthcare: chapters 26–30 pp.XXIV, 789-994

Loss of earning capacity:chapters 31&32 pp.XXV, 995-1058

Funeral benefits: chapter 33 pp.XXVII, 1059-1064

Family supportbenefits: chapters 34 pp.XXVII, 1065-1101

Non-economic loss benefits: chapters 35&36 pp.XXVIII, 1103-1182

Healthcare: chapters 26–30 pp.XXIV, 789-994

Loss of earning capacity:chapters 31&32 pp.XXV, 995-1058

Funeral benefits: chapter 33 pp.XXVII, 1059-1064

Family supportbenefits: chapters 34 pp.XXVII, 1065-1101

Non-economic loss benefits: chapters 35&36 pp.XXVIII, 1103-1182

23

Recommendations re BenefitsRecommendations re Benefits

1. Road Accident Benefits Scheme pp.LVIII, 1308 – 1317

2. Funded by

fuel levy; surcharges on road use fines; surcharges on registration of certain

vehicles. Pay-as-you-go scheme pp.XXXVI-XL, 181-276

3. Integration within system of comprehensive social protection pp.XXXVIII-XL, 373-427

1. Road Accident Benefits Scheme pp.LVIII, 1308 – 1317

2. Funded by

fuel levy; surcharges on road use fines; surcharges on registration of certain

vehicles. Pay-as-you-go scheme pp.XXXVI-XL, 181-276

3. Integration within system of comprehensive social protection pp.XXXVIII-XL, 373-427

24

4. Safety-net only with limitations on benefits.

Thresholds – waiting periods for income support benefits, severity assessment of impairment for life enhancement benefits.

Ceilings – caps on income and family support, maximum on life enhancement benefits.

Prescribed benefits – tariffs on healthcare, schedule for life enhancement benefits, flat rate funeral benefits. pp.XL, 428-467

5. Victim retains common law right to sue for damages from wrongdoer if not satisfied with State provided road accident benefits pp.XLI, 468-503

4. Safety-net only with limitations on benefits.

Thresholds – waiting periods for income support benefits, severity assessment of impairment for life enhancement benefits.

Ceilings – caps on income and family support, maximum on life enhancement benefits.

Prescribed benefits – tariffs on healthcare, schedule for life enhancement benefits, flat rate funeral benefits. pp.XL, 428-467

5. Victim retains common law right to sue for damages from wrongdoer if not satisfied with State provided road accident benefits pp.XLI, 468-503

25

6. Fault plays no part – benefits available to all road accident victims pp.XLII, 514-564

7. Lump sum awards reduced. Healthcare, rehabilitation and lifecare fees paid to

supplier at time of provision of goods and services. Income and family support made by periodic

payment. Funeral benefits and family adjustment benefits

paid by flat rate lump sum. Life enhancement benefits paid in lump sum

according to schedule pp.XLII, 587-664

6. Fault plays no part – benefits available to all road accident victims pp.XLII, 514-564

7. Lump sum awards reduced. Healthcare, rehabilitation and lifecare fees paid to

supplier at time of provision of goods and services. Income and family support made by periodic

payment. Funeral benefits and family adjustment benefits

paid by flat rate lump sum. Life enhancement benefits paid in lump sum

according to schedule pp.XLII, 587-664

26

8. Healthcare = hospitals, medical, pharmaceutical, therapeutic, prosthetic, appliances and lifecare. To provincial and private suppliers. Tariff. No waiting period. Paid to suppliers pp.XLV-LI, 789-994

8. Healthcare = hospitals, medical, pharmaceutical, therapeutic, prosthetic, appliances and lifecare. To provincial and private suppliers. Tariff. No waiting period. Paid to suppliers pp.XLV-LI, 789-994

27

9. Income support Paid to earners for temporary and permanent loss of

earning capacity. Paid to non-earners only for permanent loss of

earning capacity (12/18 months). International Classification of Functioning (ICF) -

assessment of disablement Waiting periods - basic conditions of Employment

Act plus 7/20 working days. Earners benefits = 80% of net pre-accident income

to maximum amount (highest marginal tax rate on R8000).

Non-earners benefits = 80% of tax threshold pp.LI-LIV,

995-1058

9. Income support Paid to earners for temporary and permanent loss of

earning capacity. Paid to non-earners only for permanent loss of

earning capacity (12/18 months). International Classification of Functioning (ICF) -

assessment of disablement Waiting periods - basic conditions of Employment

Act plus 7/20 working days. Earners benefits = 80% of net pre-accident income

to maximum amount (highest marginal tax rate on R8000).

Non-earners benefits = 80% of tax threshold pp.LI-LIV,

995-1058

28

10. Funeral benefits = flat rate lump sum (R15 000) pp.LIV, 1059-1064

11. Family adjustment benefits = flat rate lump sum (R10 000/R15 000) pp.LVI, 1065-1101

10. Funeral benefits = flat rate lump sum (R15 000) pp.LIV, 1059-1064

11. Family adjustment benefits = flat rate lump sum (R10 000/R15 000) pp.LVI, 1065-1101

29

12. Family support benefits available to children and spouses/partners.

Children until eighteen years or twenty-three years.

Surviving spouses periods from three years to five years.

Benefits = one half for surviving spouses and children and to share in one half of deceased’s spouses income support benefits.

Payable as pension. pp.LIV-LVI, 1065-1101

12. Family support benefits available to children and spouses/partners.

Children until eighteen years or twenty-three years.

Surviving spouses periods from three years to five years.

Benefits = one half for surviving spouses and children and to share in one half of deceased’s spouses income support benefits.

Payable as pension. pp.LIV-LVI, 1065-1101

30

13. Life enhancement benefits

Calculated according to impairment determined by AMA Guides.

Eligible if assessed 30% or more Whole Person Impairment.

Amounts of benefits = percentage of maximum amount payable = R500,000.

Paid in lump sum. pp.LVII, 1103-1182

13. Life enhancement benefits

Calculated according to impairment determined by AMA Guides.

Eligible if assessed 30% or more Whole Person Impairment.

Amounts of benefits = percentage of maximum amount payable = R500,000.

Paid in lump sum. pp.LVII, 1103-1182

31

Cost Drivers Cost Drivers pp.1340 - 1362

Reviewable periodic payments

Abolition of foreign currency payments

Healthcare tariffs

Managed healthcare

Direct payment to suppliers

Reviewable periodic payments

Abolition of foreign currency payments

Healthcare tariffs

Managed healthcare

Direct payment to suppliers

Reduction in costsReduction in costs

32

Cost DriversCost Drivers

Waiting periods

Benefits limited to declared income

Monetary ceilings

Limitation on dependants

Time limit

Impairment thresholds

Waiting periods

Benefits limited to declared income

Monetary ceilings

Limitation on dependants

Time limit

Impairment thresholds

Reduction in costsReduction in costs

pp.LVII – LX, XXVI, 1308 - 1319

33

Cost DriversCost Drivers

No-fault participation

Payment to public sector

Flat rate funeral and family adjustment benefits

Benefits to non-earners

Removal of ceilings on passengers

No-fault participation

Payment to public sector

Flat rate funeral and family adjustment benefits

Benefits to non-earners

Removal of ceilings on passengers

Increase in costsIncrease in costs

pp.LVII – LX, XXVI, 1308 - 1319

34

Systemic Approach vs Piecemeal Systemic Approach vs Piecemeal FiddlingFiddling

Context (SA, data & research, international)

Policy and strategy (National planning. Constitution)

Coordination of policy, benefits and delivery (Departments of Finance, Minerals & Energy, Transport, Health, Social Development; Parliament)

Context (SA, data & research, international)

Policy and strategy (National planning. Constitution)

Coordination of policy, benefits and delivery (Departments of Finance, Minerals & Energy, Transport, Health, Social Development; Parliament)

35

Ad hoc example (1)Ad hoc example (1)

Object: Save money

Proposal: Introduce periodic payments

Result: Insurance vs social security? Delay healthcare & rehabilitation because

fault Delay pension because fault Retain legalistic approach Retain transaction costs Increase delivery costs & incapacity

Object: Save money

Proposal: Introduce periodic payments

Result: Insurance vs social security? Delay healthcare & rehabilitation because

fault Delay pension because fault Retain legalistic approach Retain transaction costs Increase delivery costs & incapacity

36

Ad hoc example (2)Ad hoc example (2)

Object: Save money

Proposal: Remove or limit compensation

Result: Insurance or social security? Common law right to sue for balance of

damages? No exchange – limit compensation for

automatic entitlement Retain delays & transaction costs Retain misallocation of compensation Duplication & inappropriate personnel

Object: Save money

Proposal: Remove or limit compensation

Result: Insurance or social security? Common law right to sue for balance of

damages? No exchange – limit compensation for

automatic entitlement Retain delays & transaction costs Retain misallocation of compensation Duplication & inappropriate personnel

37

RAF Amendment BillRAF Amendment Bill p.117

1. Compulsory mediation/arbitration (pp.771)

2. Reduce compensation by collateral benefits (pp.463)

3. Limit compensation for non-residents (pp.424)

4. Remove compensation for emotional shock (pp.874)

5. Managed healthcare (pp.938)

6. No direct payment to healthcare providers (pp.842)

7. No payment to lawyers (pp.345)

8. Periodic payments (pp.642, 1132)

1. Compulsory mediation/arbitration (pp.771)

2. Reduce compensation by collateral benefits (pp.463)

3. Limit compensation for non-residents (pp.424)

4. Remove compensation for emotional shock (pp.874)

5. Managed healthcare (pp.938)

6. No direct payment to healthcare providers (pp.842)

7. No payment to lawyers (pp.345)

8. Periodic payments (pp.642, 1132)

38

Comment on RAF Amendment BillComment on RAF Amendment Bill

1. No context, vision or planning

2. “Neither fish nor fowl”

3. Purpose to avoid, delay or reduce expenditure

4. No data or research

5. Unproven capacity

1. No context, vision or planning

2. “Neither fish nor fowl”

3. Purpose to avoid, delay or reduce expenditure

4. No data or research

5. Unproven capacity

39

DeliveryDelivery

RAF: chapters 37 – 39 pp.XXIX, 1183-1284

Implementation: chapters 40 – 42 pp.XXX, 1285-1363



40

Current SchemeCurrent Scheme













41

(Figure 10.6: Total petrol and diesel consumption in South Africa and (Figure 10.6: Total petrol and diesel consumption in South Africa and RAF income from the fuel levy: – p.223: Source: SAPIA Annual Report RAF income from the fuel levy: – p.223: Source: SAPIA Annual Report 2001 & RAF Annual Reports)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

42

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

Serious17%

Moderate27%

Fatal8%

Light48%

43

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

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

44

Damages apportioned

26%

Unlimited claims15%

Limited liability claims59%

(Figure 8.7: Distribution of claims paid in 1999 according to (Figure 8.7: Distribution of claims paid in 1999 according to claim type – p.170: Source: HSRC Report)claim type – p.170: Source: HSRC Report)

45

(Figure 8.8: Distribution of amounts paid in 1999 according to (Figure 8.8: Distribution of amounts paid in 1999 according to claim type – p.171: Source: HSRC Report)claim type – p.171: Source: HSRC Report)

Limited liability claims

6%

Unlimited claims71%

Damages apportioned

23%

See Volume 3: MRC Report p.383See Volume 3: MRC Report p.383

46

Distribution of Claim SizeDistribution of Claim Size

0

3

5

8

10

13

15

To

tal A

mo

un

t (%

)

0

10

20

30

40

50

60

Nu

mb

er

of

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 +

47

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 compensationCategories of compensation

48

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

Funeral expenses

0% Future loss of support

12%

General damages

38%

Past loss of support

4%

Future loss of earnings

18%

Past loss of earnings

5%

Future medical expenses

14%

Past medical expenses

8%

Other1%

49

The Claims ProcessThe 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

50

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

2.3

2.8

2.9

3.3

2.6

0.0 1.0 2.0 3.0 4.0

Light

Moderate

Serious

Fatal

All claims

Average number of years

51

(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%)

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

RAF's Legal and Expert

Costs5%

Claimants' Administrative,

Legal and Expert Costs

10%

RAF Administrative

Expenses6%

Reserve13%

Other2%

Compensation64%

Oth

er

21

%

52

(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%)

Oth

er

23

%

Compensation75%

RAF Administrative Expenses

7%

Claimants' Administrative, Legal and Expert Costs

11%

RAF's Legal and Expert

Costs5%

Other2%

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

53

Distribution & Transaction CostsDistribution & 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

54

AbuseAbuse

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

55

Fault vs “No-Fault”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

56

Lump Sum Compensation vs Periodic Lump Sum Compensation vs Periodic Payment of BenefitsPayment 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

57

General DamagesGeneral Damages

Common Law Common Law RecognitionRecognition

Sense of JusticeSense of Justice

A Real LossA Real Loss

Reconciliation and Reconciliation and SolaceSolace

Financing Lifestyle Financing Lifestyle ChangesChanges

Absence of Other Absence of Other Assistance & SupportAssistance & Support

Common Law Common Law RecognitionRecognition

Sense of JusticeSense of Justice

A Real LossA Real Loss

Reconciliation and Reconciliation and SolaceSolace

Financing Lifestyle Financing Lifestyle ChangesChanges

Absence of Other Absence of Other Assistance & SupportAssistance & Support

No Medium of ExchangeNo Medium of Exchange

UncertaintyUncertainty

InconsistencyInconsistency

Unequal TreatmentUnequal Treatment

Incentives to Maximize Incentives to Maximize DamageDamage

Lifestyle ChangesLifestyle Changes

Drain on ResourcesDrain on Resources

Small ClaimsSmall Claims

Transaction CostsTransaction Costs

Chapter 36

58

DeliveryDelivery





59

Recommendations re DeliveryRecommendations re Delivery

1. Road Accident Benefits Scheme (RABS) to administer proposed scheme pp.LVIII, 1308-1317

2. RAF to wind down with ringfencing of current obligations pp.LVIII - LIX, 1317-1318

3. RABS

Subject to oversight of Ministry (Social Development / Transport) and Board

Executive competency (managerial and financial experience in private sector)

Administrative competencies (healthcare and pension administration) pp.LVIII, 1304-1308



3. RABS

Subject to oversight of Ministry (Social Development / Transport) and Board

Executive competency (managerial and financial experience in private sector)

Administrative competencies (healthcare and pension administration) pp.LVIII, 1304-1308

60

Oversight of the RAFOversight of the RAF

Minister

Financial Services Board

Auditor-General

Board

Minister

Financial Services Board

Auditor-General

Board

61

Minister (pp.1304 - 1307)

Change of Ministry?

Provision of social security benefits

Core competency

Minister (pp.1304 - 1307)

Change of Ministry?

Provision of social security benefits

Core competency

62

Financial Services Board (pp.1195 - 1196)

Advice and financial supervision of FSB should not apply

Financial Services Board (pp.1195 - 1196)

Advice and financial supervision of FSB should not apply

63

Auditor-General (pp.1196-1198)

Limitation of audit

120/50 000 claims files checked

Auditor-General (pp.1196-1198)

Limitation of audit

120/50 000 claims files checked

64

Board (pp.1183-1195, 1198-1206, 1206-1209,1209-1215)

Absence of managerial and financial expertise

Sectional interests and conflicts of interests

Lack of political independence

Failure to give proper accounting

Board (pp.1183-1195, 1198-1206, 1206-1209,1209-1215)

Absence of managerial and financial expertise

Sectional interests and conflicts of interests

Lack of political independence

Failure to give proper accounting

65

Management of RAFManagement of RAF

Context

Expertise

Employment costs

Capacity

Consultants

Severance packages

Context

Expertise

Employment costs

Capacity

Consultants

Severance packages

66

Context (pp.1219-1229)

Monopoly

No evaluation of service delivery

No bottom line

Organisation in transition

Context (pp.1219-1229)

Monopoly

No evaluation of service delivery

No bottom line

Organisation in transition

67

Expertise (pp.1229-1239)

Absence management and financial experience

Absence healthcare skills

Absence administrative and clerical competencies

Oversupply legal qualifications (44% total employees / 86% claims staff)

Expertise (pp.1229-1239)

Absence management and financial experience

Absence healthcare skills

Absence administrative and clerical competencies

Oversupply legal qualifications (44% total employees / 86% claims staff)

68

Employment Costs (pp.1239-1247)

CEO package: R990,000 p.a. / R82,500 p.m.

Managers: R350,000 – R544,000 p.a. / R44,672 p.m.

Tea lady: R4,150 p.m.

Employee in private sector earning R9,000 enters RAF with R44,000

Employment Costs (pp.1239-1247)

CEO package: R990,000 p.a. / R82,500 p.m.

Managers: R350,000 – R544,000 p.a. / R44,672 p.m.

Tea lady: R4,150 p.m.

Employee in private sector earning R9,000 enters RAF with R44,000

69

Capacity

Forensic audit report pp.1228-1229, 1262- 1263

Consultants pp.1265-1269

Litigation management pp.144-148, 738-753

Absence of data pp.16, 23, 175-176, 1198-1206

Capacity

Forensic audit report pp.1228-1229, 1262- 1263

Consultants pp.1265-1269

Litigation management pp.144-148, 738-753

Absence of data pp.16, 23, 175-176, 1198-1206

70

Consultants (pp.1262-1274)

Circa: R20m p.a.

R218,400 for photocopying and collation of material

R340,000 including preparation of PowerPoint templates

Consultants (pp.1262-1274)

Circa: R20m p.a.

R218,400 for photocopying and collation of material

R340,000 including preparation of PowerPoint templates

71

Severance Packages (pp.1244-1246, 1275-1279, 1283)

24 months salary across the board

Van Oudtshoorn package = R2.2 million for 5 years employment (166 years)

Mabunda package = R1.2 million for 23 months employment (118 years)

Severance Packages (pp.1244-1246, 1275-1279, 1283)

24 months salary across the board

Van Oudtshoorn package = R2.2 million for 5 years employment (166 years)

Mabunda package = R1.2 million for 23 months employment (118 years)

72

Recommendations re DeliveryRecommendations re Delivery



3. RABS subject to oversight of Ministry (social development / transport) and Board. Executive competency (managerial and financial experience in private sector) and administrative competencies (healthcare and pension administration) pp.LVIII, 1304-1308



3. RABS subject to oversight of Ministry (social development / transport) and Board. Executive competency (managerial and financial experience in private sector) and administrative competencies (healthcare and pension administration) pp.LVIII, 1304-1308

74

Social security covers a wide variety of public and private Social security covers a wide variety of public and private measures that provide cash or any kind of benefits or measures that provide cash or any kind of benefits or both, firstly, in the event of an individual’s earning both, firstly, in the event of an individual’s earning power permanently ceasing, being interrupted, never power permanently ceasing, being interrupted, never developing, or being exercised only at unacceptable developing, or being exercised only at unacceptable social cost and such person being unable to avoid social cost and such person being unable to avoid poverty, and, secondly, in order to maintain children. poverty, and, secondly, in order to maintain children. The domains of social security are: poverty The domains of social security are: poverty prevention, poverty alleviation, social compensation prevention, poverty alleviation, social compensation and income distributionand income distribution.. - The White Paper on Social Welfare p.405

Social security covers a wide variety of public and private Social security covers a wide variety of public and private measures that provide cash or any kind of benefits or measures that provide cash or any kind of benefits or both, firstly, in the event of an individual’s earning both, firstly, in the event of an individual’s earning power permanently ceasing, being interrupted, never power permanently ceasing, being interrupted, never developing, or being exercised only at unacceptable developing, or being exercised only at unacceptable social cost and such person being unable to avoid social cost and such person being unable to avoid poverty, and, secondly, in order to maintain children. poverty, and, secondly, in order to maintain children. The domains of social security are: poverty The domains of social security are: poverty prevention, poverty alleviation, social compensation prevention, poverty alleviation, social compensation and income distributionand income distribution.. - The White Paper on Social Welfare p.405

Social Security DefinitionSocial Security Definition

75

The Constitution & Social SecurityThe Constitution & Social Security

“We live in a society in which there are great disparities in wealth. Millions of people are living in deplorable conditions and in great poverty. There is a high level of unemployment, inadequate social security, and many do not have access to clean water or to adequate health services. These conditions already existed when the Constitution was adopted and a commitment to address them, and to transform our society into one in which there will be human dignity, freedom and equality, lies at the heart of our new constitutional order. For as long as these conditions continue to exist that aspiration will have a hollow ring.” - Subramoney v Minister of Health, KwaZulu-Natal 1998 (1) 765 (CC) p.420

“We live in a society in which there are great disparities in wealth. Millions of people are living in deplorable conditions and in great poverty. There is a high level of unemployment, inadequate social security, and many do not have access to clean water or to adequate health services. These conditions already existed when the Constitution was adopted and a commitment to address them, and to transform our society into one in which there will be human dignity, freedom and equality, lies at the heart of our new constitutional order. For as long as these conditions continue to exist that aspiration will have a hollow ring.” - Subramoney v Minister of Health, KwaZulu-Natal 1998 (1) 765 (CC) p.420

76

The Common Law Remedy to SueThe Common Law Remedy to Sue

“Road accident compensation should be a safety net to cover basic needs and over and above that those who have been wronged should rely upon the common law and wrongdoers should rely upon the insurance industry.” – Judge Lewis Goldblatt p.472

“Road accident compensation should be a safety net to cover basic needs and over and above that those who have been wronged should rely upon the common law and wrongdoers should rely upon the insurance industry.” – Judge Lewis Goldblatt p.472

77

Fault & “No-Fault”Fault & “No-Fault”

“Critics of the traditional system charge that it costs

too much and is an inefficient, inequitable and slow mechanism for compensating injured people. Critics of “no-fault” counter that “no-fault” systems infringe on injured people’s fundamental legal rights to recover all their losses from their insurer and that the extent of any improvement provided by “no-fault” would fail to justify this improvement.” – Dr S Carroll, RAND Institute for Civil Justice.– Dr S Carroll, RAND Institute for Civil Justice. p.565 p.565

“Critics of the traditional system charge that it costs too much and is an inefficient, inequitable and slow mechanism for compensating injured people. Critics of “no-fault” counter that “no-fault” systems infringe on injured people’s fundamental legal rights to recover all their losses from their insurer and that the extent of any improvement provided by “no-fault” would fail to justify this improvement.” – Dr S Carroll, RAND Institute for Civil Justice.– Dr S Carroll, RAND Institute for Civil Justice. p.565 p.565

78

Fault & “No-Fault”Fault & “No-Fault”

“Traditional tort liability for personal injury from auto accidents has long been criticised on the grounds that its costs are too high and that any compensation therefrom is inefficient, unfair and dilatory. But no fault laws themselves are criticised for infringing upon the fundamental legal right to be paid based on fault not only economic but also non-economic damages (primarily for pain and suffering), and for failing in their promise to suppress auto insurance costs. The latter criticism is countered with the argument that no-fault laws’ financial shortcomings are due to preserving too many tort claims (above thresholds of either dollar losses or verbally described severity of injury) payable in addition to no-fault.” – O’Connell et al 1998 pp.565-566

“Traditional tort liability for personal injury from auto accidents has long been criticised on the grounds that its costs are too high and that any compensation therefrom is inefficient, unfair and dilatory. But no fault laws themselves are criticised for infringing upon the fundamental legal right to be paid based on fault not only economic but also non-economic damages (primarily for pain and suffering), and for failing in their promise to suppress auto insurance costs. The latter criticism is countered with the argument that no-fault laws’ financial shortcomings are due to preserving too many tort claims (above thresholds of either dollar losses or verbally described severity of injury) payable in addition to no-fault.” – O’Connell et al 1998 pp.565-566

79

Lump Sum CompensationLump Sum Compensation

“A successful claim is not a reward, it is not some form of prize, it is to assist in coping with the unknown future … we are in favour of a monthly payment because people do see the lump sum payment as a reward, they want to spend the money in whichever way they like. Some cannot manage their money well, there is a cost in the management of money, people do not always realise how long term are their needs …” – Ms Amore Malan, Quadriplegic Association of South Africa p.594

“A successful claim is not a reward, it is not some form of prize, it is to assist in coping with the unknown future … we are in favour of a monthly payment because people do see the lump sum payment as a reward, they want to spend the money in whichever way they like. Some cannot manage their money well, there is a cost in the management of money, people do not always realise how long term are their needs …” – Ms Amore Malan, Quadriplegic Association of South Africa p.594

80

Lump Sum CompensationLump Sum Compensation

“We guess at the moment. We do the best we can..”” – Judge Dyalin Chetty. p.595

“Claimants outlive awards but awards do not outlive claimants.” - RAVA p.597

“We guess at the moment. We do the best we can..”” – Judge Dyalin Chetty. p.595

“Claimants outlive awards but awards do not outlive claimants.” - RAVA p.597

81

General DamagesGeneral Damages

“There is no medium of exchange for happiness. There is no market for expectation of life. The monetary evaluation of non-pecuniary loss is a philosophical and policy exercise more than a legal or logical one. The award must be fair and reasonable, fairness being gauged by earlier decision; but the award must also of necessity be arbitrary or conventional. No money can

provide true restitution.” – Andrews v Grand & Toy Alberta

Ltd., (1978) 83 DLR (3D) 452, Dickson J p.1127

1 road accident fund commission. 2 significance of road accident benefits 900 000 vehicles in road...

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