REPORT OF THE INTERDEPARTMENTAL COMMITTEE ON THE ROAD ACCIDENT FUND COMMISSION REPORT

1
REPORT OF THE INTER-DEPARTMENTAL COMMITTEE ON
THE ROAD ACCIDENT FUND COMMISSION REPORT

• National Department of
  Transport
• September 2003

2
The RAFC Report

• The Road Accident Fund Commission of Inquiry
  (RAFC) was established to inquire into and to
  make recommendations regarding a reasonable,
  equitable, affordable and sustainable system for
  the payment of compensation or benefits in the
  event of the injury or death of persons in road
  accidents.
• The RAFC handed its report to the State President
  in December 2002.
• The RAFC report comprises a detailed assessment
  of the RAF and its activities, and makes a total
  of 179 recommendations for the reform of the
  current road accident compensation system.

3
The RAF Board Response

• The Board of the RAF considered the RAFC
  recommendations, and submitted its detailed
  response to each.

4
The Inter-Departmental Committee

• Cabinet instructed the NDoT to convene an
  inter-departmental committee comprising the
  Departments represented on the JCPS cluster to
  consider the contents of the RAFC report and
  formulate a position, for consideration by the
  IMSC Committee, and subsequent submission to
  Cabinet.
• The IDC-RAFC Committee was established and met
  several times to deliberate on the RAFC report
  and its recommendations.
• The work of the IDC-RAFC was completed in March
  2003 with the development of a report entitled
  Position on the Road Accident Fund Commission
  Report.

5
Key Themes Emerging from the RAFC Report 1.    
The purpose and role of the RAF2.     The
administration of the RAF3.     The basis for
compensation4.     The equity and
sustainability of the RAF and5.     The current
system of a road accident compensation fund
versus a social security road benefit scheme.
6
Major Recommendations

• Shift from Legal to Medical Basis
• Since the RAF has a legal basis for processing
  claims and awarding compensation, huge funds go
  to professional fees (23 of RAF costs are
  transaction costs, which IDC-RAFC does not
  consider justified).
• The IDC-RAFC supports the proposed shift from a
  legal to a medical basis for compensation. Such a
  shift would require a restructuring of the
  current RAF or the creation of a Road Accident
  Benefit Scheme (RABS).

7
Major Recommendations contd.

• Shift from fault to no-fault basis
• The current RAF system is based on the
  apportionment of blame. The IDC-RAFC supports the
  RAFC proposal for a shift from the fault system
  to a no fault system, which would be more
  equitable. Such a shift will however increase the
  number of victims eligible for claims and thus
  increase total claims against the fund.

8
Major Recommendations contd

• Compensation Approach
• The RAFC found that the current RAF approach
  involving payment of a lump sum compensation to
  the victim, is not sustainable in the long term.
  It proposed a pension payment approach instead,
  and this is supported by the IDC-RAFC.

9
Major Recommendations contd

• Compensation fund vs social security benefit
  scheme
• The IDC-RAFC supports the RAFC proposal that the
  RAF change from an autonomous dedicated fund for
  compensating road accident victims and be
  integrated into the social security system of the
  country. The IDC-RAFC however recommends that
  comments be invited from a wide range of
  stakeholders before such a decision is taken.

10
Institutional Implications

• There are two options for reforming the road
  compensation system.
• Option 1 is recommended by the RAFC report and
  calls for the phasing out of the current RAF and
  its replacement by the RABS.
• Option 2 is a restructuring of the current RAF in
  accordance with the recommendations of the RAFC
  report.
• In both cases IDC-RAFC recommends further
  analysis to quantify the implications.

11
Financial Implications

• A shift to a no fault basis of compensation
  will increase the total amount of claims against
  the road accident compensation system since the
  number of victims eligible for claims will
  increase.
• Replacing the RAF with the RABS will require an
  additional amount of R2 billion per annum for the
  phasing in period of at least 3 years from the
  national fiscus

12
Legal Implications

• Changes to legislation will be required,
  depending on which option is selected
• Option 1 Formulation of a new Road Accident
  Benefit Scheme Bill and Act
• Option 2 An amendment of the existing Road
  Accident Fund Act

13
Profile of Road Accident Victims The exclusion,
as a basis for claiming road accident
compensation, of nervous shock resulting from
observing or learning of the death or injury of
another person in a road accident, without being
in the accident oneself. Currently a person may
claim compensation from the RAF in such
circumstances.
14
Social Security and Road Accident Benefits The
limitation of road accident compensation claims
by non-residents of the Republic, to a reasonable
amount to be determined.Currently non-residents
involved in road accidents within the country
enjoy the same unlimited cover from the RAF that
South African residents have.
15
The Safety Net Threshold and Ceilings The
setting-off of benefits payable under any other
social security scheme as a result of a road
accident, against road accident compensation
payable by the RAF.Currently not all such
benefits are deductible from compensation
recoverable from the RAF.
16
Lump Sum Compensation PaymentsThe payment of
road accident compensation i.r.o. future economic
losses, in periodic instalments rather than by
way of lump-sums.Currently such compensation is
payable by the RAF by way of predetermined,
capitalised lump-sums in advance.
17
Alternatives to Lump Sum Awards The amendment
of the Income Tax Act, 1962, to exempt road
accident compensation paid in periodic
instalments, from income tax. Currently such
compensation-by-instalment would not be regarded
as being of a capital nature and would be subject
to income tax.
18
Road Accident LitigationThe introduction of a
procedure for the resolution of disputes about
road accident compensation claims, through
mediation and arbitration.Currently such
disputes require to be litigated upon in the
courts of the country.
19
Health Care and Road Accident Compensation The
application of the UPFS tariff to medical
expenses recoverable from the RAF by road
accident compensation claimants.Currently the
RAF has no control over the rate at which a road
accident compensation claimant is charged, at the
RAFs cost, by the relevant medical service
provider.
20
Death and Funeral BenefitsThe payment of
funeral benefits to road accident compensation
claimants at a flat rate (R15 000 in 2003 values
adjusted annually as per CPI).Currently the RAF
must inquire into the actual costs incurred in
connection with a funeral and must compensate the
claimant for whatever can be proved.
21
Oversight of the RAF The repeal of the 1993 Act
providing for the financial supervision of the
RAF by the Financial Services Board.The
Financial Supervision of the Road Accident Fund
Act, 1993 (Act No. 8 of 1993), has little
practical meaning.
22
Decisions by the IMSC Schedule 1 Contains the
Commission recommendations which the IDC regards
as reasonably capable of implementation in the
short to medium term (not exceeding 18 months)
and which are unlikely to require legislation.
23
Schedule 2 Contains the Commission
recommendations which the IDC regards as
reasonably capable of implementation in the short
to medium term (not exceeding 18 months) and
which are likely to require legislation.
24
Schedule 3 Contains the Commission
recommendations which the IDC regards as
reasonably capable of implementation in the
medium to long term (18 to 36 months) and which
are unlikely to require legislation.
25
Schedule 4 Contains the Commission
recommendations which the IDC regards as
reasonably capable of implementation in the short
to medium term (18 to 36 months) and which are
likely to require legislation. Schedule
5 Contains the Commission recommendations which
are not supported by the IDC.
26
Recommendations to Cabinet

• It is recommended that Cabinet approves
• 1.1 The approach proposed by the
  Inter- Departmental Committee (IDC)
• 1.2 Accept the recommendations as contained in
  schedules 1-5.
• 1.3 The Department proceeds with legislation
  amendments in areas identified in the IDC
  Report.
• 1.4 Accept the recommendation to shift to RABS
  after addressing the problems, identified by the
  IDC. In the meantime the RAF should continue,
  and measures be taken to identify weaknesses and
  deal with them in the short to medium term.

27
Recommendations to Cabinet (contd)

• 1.5 The IDC continues to explore further the
  institutional and financial implications for the
  shift from the Road Accident Fund to a Road
  Accident Benefit Scheme (RABS), including cost
  associated with the phase in and phase out
  process.
• 1.6 Take an incremental approach
• - improve the RAF in the short to medium
  term
• - deal with other recommendations.

28
Recommendations to Cabinet (contd)
1.7 That a more technical group be put together
(NDoT, Treasury Social Development) to
conduct a technical analysis to quantify the
implications of the proposed reform process.
1.8 That the IDC-RAFC report be submitted to the
Transport and Welfare and Population
Development Portfolio Committees as well as
the Select Committee on Public Accounts for
in- depth consideration of the recommendations
and to make recommendations to Cabinet on the
acceptance thereof.