No title provided

1
ROAD ACCIDENT FUND COMMISSION
2
Significance of Road Accident Benefits

• 900 000 vehicles in road accidents
• 130 000 injuries and 10 000 deaths
• R2.7bn raised by fuel levy
• 80 000 loss occurrence events/150 000 claims
• Transaction costs known R620m unknown costs
• Further costs pain and suffering, lost
  productivity, healthcare burden, duplication of
  pensions

3
Mandate
4
Reasonable (p.10)

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

5
Equitable (p.11)

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

6
Affordable (p.10)

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

7
Sustainable (p.10)

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

8
Questions

• Is there any rationale for the intervention of
  the State in the fate of the victims of road
  accidents in a manner more advantageous to them
  than to victims of violent crime, birth defects
  or household accidents? p.11
• In the event that rationale is found to justify
  legislative intervention and State regulation of
  a system of compensation of benefits to the
  victims of road accidents then For whose benefit
  does the State intervene? Is intervention for the
  benefit of negligent vehicle drivers or for the
  benefit of victims and survivors of road
  accidents? p.12

9
Questions

• Should such intervention be viewed as a system of
  insurance or part of State administered social
  security benefits?
• Should State intervention be limited to
  facilitation of funding a system of road accident
  compensation or should the State be concerned
  with the establishment of a structure to
  administer provision of compensation or benefits?
• p.12

10
Questions

• What should be the nature of any compensation or
  benefits made available to victims of road
  accidents?
• What should be the extent of compensation or
  benefits?
• To what extent should a system of road accident
  compensation be integrated within the provision
  of other social security benefits?
• p.12

11
Stakeholders p.99

• Road user
• Taxpayer
• Government
• (other role players agents servants
  facilitators)

12
Outline of Report Volumes 1 2

• Current situation chapters 3 14
• Policy issues chapters 15 25
• Current compensation proposed benefits
• chapters 26 36
• Delivery chapters 37 42
• Table of Contents

13
Research Results Volume 3

• Analysis of claims finalized by the RAF in
  1998/1999 Human Sciences Research 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 Fish p.481

14
Research Results Volume 3

• ICF case studies World Health Organization
  
  p.497
• Impact of HIV/AIDS on road accident benefits
  Centre for Actuarial Research p.531
• The cost of healthcare for road accident victims
  at public hospitals Dr J Herbst /MRC
  
  p.547
• Actuarial valuation of recommendations
  NMG-Levy Actuaries p.569

15
Current Scheme

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

16
Current Scheme of Compensation

• Levy on fuel (18,5c/l) to RAF
• Motorist at fault
• Innocent victim claims compensation
• Compensation medical expenses, funeral
  expenses, loss income/support, general damages
• Once-and-for-all lump sum compensation
• Compensation unlimited
• Wrongdoing motorist indemnified

17
Evaluation p.350

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

18
Evaluation p.367

• Exclusion (pp.368, 373 427)
• Fault (pp.369, 513 584)
• Allocation of compensation (pp.369, 160 177)
• Unlimited compensation (pp.370, 160 177, 428
  467)
• Transaction costs (pp.370, 277 307, 309 348)
• Lump sum payments (pp.371, 585 664)
• Delivery (pp.136-160, 351-357, 360-367, 546-553,
  616-637, 1183-1285)

19
Policy Issues

• Social Security chapters 15 17 pp.XIX, 373-467
• Common Law Remedies chapter 18 pp.XX, 468 - 503
• Fault vs No-Fault chapters 1920 pp.XXI, 513-584
• Lump Sum Awards vs
• Periodic Payments chapters 2122 pp.XXI, 585-668
• Disability Assessment chapter 23 pp.XXII,
  669-703

20
Policy Shifts

• Liability Insurance Social Security
• Premium Taxation
• Fault No-Fault
• Compensation Benefits
• Lump Sums Pensions
• Unlimited Defined

21
Object of Road Accident Benefits Scheme
The Road Accident Benefits Scheme should provide
timeous, appropriate and effective
healthcare and rehabilitative intervention,
protection against impoverishment,
restoration of a life with dignity and
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
Benefits

• Healthcare chapters 2630 pp.XXIV, 789-994
• Loss of earning capacity
• chapters 3132 pp.XXV, 995-1058
• Funeral benefits chapter 33 pp.XXVII, 1059-1064
• Family support
• benefits chapters 34 pp.XXVII, 1065-1101
• Non-economic loss
• benefits chapters 3536 pp.XXVIII, 1103-1182

23
Recommendations re Benefits

• Road Accident Benefits Scheme pp.LVIII, 1308
  1317
• 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
• Integration within system of comprehensive social
  protection pp.XXXVIII-XL,
  373-427

24

• 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
• 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

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

• 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

• 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

• Funeral benefits flat rate lump sum (R15 000)
  
  pp.LIV, 1059-1064
• Family adjustment benefits flat rate lump sum
  (R10 000/R15 000)
  pp.LVI, 1065-1101

29

• 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 deceaseds
  spouses income support benefits.
• Payable as pension. pp.LIV-LVI, 1065-1101

30

• 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 pp.1340 - 1362
Reduction in costs

• Reviewable periodic payments
• Abolition of foreign currency payments
• Healthcare tariffs
• Managed healthcare
• Direct payment to suppliers

32
Cost Drivers
Reduction in costs

• Waiting periods
• Benefits limited to declared income
• Monetary ceilings
• Limitation on dependants
• Time limit
• Impairment thresholds

pp.LVII LX, XXVI, 1308 - 1319
33
Cost Drivers
Increase in costs

• No-fault participation
• Payment to public sector
• Flat rate funeral and family adjustment benefits
• Benefits to non-earners
• Removal of ceilings on passengers

pp.LVII LX, XXVI, 1308 - 1319
34
Systemic Approach vs Piecemeal Fiddling

• 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)

• 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)

• 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 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)

38
Comment 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

39
Delivery

• RAF chapters 37 39 pp.XXIX, 1183-1284
• Implementation chapters 40 42 pp.XXX,
  1285-1363

40
Current Scheme

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

41
(Figure 10.6 Total petrol and diesel
consumption in South Africa and RAF income from
the fuel levy p.223 Source SAPIA Annual
Report 2001 RAF Annual Reports)
42
(Figure 8.9 Distribution of claims paid
according to extent of injury p.171 Source
HSRC Report)
43
(Figure 26.3 Injuries with the highest impact on
the compensation 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

(Figure 8.7 Distribution of claims paid in 1999
according to claim type p.170 Source HSRC
Report)
45

(Figure 8.8 Distribution of amounts paid in
1999 according to claim type p.171 Source
HSRC Report)
See Volume 3 MRC Report p.383
46
Distribution of Claim Size
47
Categories of compensation
48

(Figure 8.13 Distribution of compensation paid
per compensation category 1999 p.174 Source
HSRC Report)
49
The Claims Process

50
Time Period (Figure 17.9 Average years from
accident to settlement, according to seriousness
of injuries Vol.3, p.188)
51
(Figure 12.1 Utilisation of RAF Income 1999)
p.282
1999
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
Transaction costs 483 - 21 RAF Admin
expenses 129(6) RAF (Legal Experts) 125(5)
Claimants (Admin, Legal Experts) 227(10)
52
(Figure 12.1 Utilisation of RAF Income 2001)
p.283
2001
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
Transaction costs 619 - 23 RAF Admin
expenses 179(7) RAF (Legal Experts) 134(5)
Claimants (Admin, Legal Experts) 306(11)
53
Distribution Transaction Costs
p.284
54
Abuse
Chapter 13

• False Claims
• Exaggerated Claims
• Opportunistic Claims
• Fraud within the RAF
• Legal Malpractice

55
Fault vs No-Fault
Chapter 19

• Vindication and Retribution
• Liability Insurance
• Incentive to Safety
• General Deterrence
• Publicity

• Issues of Proof
• Not Always Human Error
• Standard of Fault
• Contributory Negligence
• Reduction in Compensation
• Exclusion from Compensation
• Complexity and Delay
• Complexity and Cost

56
Lump Sum Compensation vs Periodic Payment of
Benefits
Chapter 21

• 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

57
General Damages
Chapter 36

• No Medium of Exchange
• Uncertainty
• Inconsistency
• Unequal Treatment
• Incentives to Maximize Damage
• Lifestyle Changes
• Drain on Resources
• Small Claims
• Transaction Costs

• Common Law Recognition
• Sense of Justice
• A Real Loss
• Reconciliation and Solace
• Financing Lifestyle Changes
• Absence of Other Assistance Support

58
Delivery

• RAF chapters 37 39 pp.XXIX, 1183-1284
• Implementation chapters 40 42 pp.XXX,
  1285-1363

59
Recommendations re Delivery

• Road Accident Benefits Scheme (RABS) to
  administer proposed scheme pp.LVIII,
  1308-1317
• RAF to wind down with ringfencing of current
  obligations pp.LVIII -
  LIX, 1317-1318
• 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 RAF

• Minister
• Financial Services Board
• Auditor-General
• Board

61

• 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

63

• 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

65
Management of RAF

• 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

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)

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

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

70

• 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)

72
Recommendations re Delivery

• Road Accident Benefits Scheme (RABS) to
  administer proposed scheme pp.LVIII,
  1308-1317
• RAF to wind down with ringfencing of current
  obligations pp.LVIII -
  LIX, 1317-1318
• 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

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74
Social Security Definition

75
The Constitution Social Security

76
The Common Law Remedy to Sue

77
Fault No-Fault

78
Fault No-Fault

79
Lump Sum Compensation

80
Lump Sum Compensation

81
General 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
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