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
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
RAF: chapters 37 – 39 pp.XXIX, 1183-1284
Implementation: chapters 40 – 42 pp.XXX, 1285-1363
40
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
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
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
RAF: chapters 37 – 39 pp.XXIX, 1183-1284
Implementation: chapters 40 – 42 pp.XXX, 1285-1363
RAF: chapters 37 – 39 pp.XXIX, 1183-1284
Implementation: chapters 40 – 42 pp.XXX, 1285-1363
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
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
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
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) and administrative competencies (healthcare and pension administration) pp.LVIII, 1304-1308
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) and administrative competencies (healthcare and pension administration) pp.LVIII, 1304-1308
73
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
82