ROAD ACCIDENT FUND COMMISSION Significance of Road Accident

ROAD ACCIDENT FUND COMMISSION

Significance of Road Accident Benefits q 900 000 vehicles in road accidents q 130 000 injuries and 10 000 deaths q R 2. 7 bn raised by fuel levy q 80 000 loss occurrence events/150 000 claims q Transaction costs = known R 620 m + unknown costs q Further costs – pain and suffering, lost productivity, healthcare burden, duplication of pensions

Mandate 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

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.

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.

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.

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.

Questions q 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 q 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

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

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

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

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

Research Results: Volume 3 q “Analysis of claims finalized by the RAF in 1998/1999”: Human Sciences Research Council p. 21 q “Analysis of road accident injuries 1998/1999”: q “Research into lump sum payments of compensation to road accident victims”: Strategy Medical Research Council p. 217 & Tactics q p. 407 “AMA Guides case studies”: Dr D Fish p. 481

Research Results: Volume 3 q “ICF case studies”: World Health Organization q “Impact of HIV/AIDS on road accident benefits”: q “The cost of healthcare for road accident victims at public hospitals”: Dr J Herbst /MRC p. 497 Centre for Actuarial Research p. 531 p. 547 q “Actuarial valuation of recommendations”: NMGLevy Actuaries p. 569

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 Abuse: chapter 13 pp. XV, 277 -309 pp. XVI, 309 -349 Evaluation: chapter 14 pp. XVI, 349 -373

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

Urban – South Africa

Rural Areas – South Africa

Rose

The home of Rose

The backyard

Bedsores

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

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

(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)

(Figure 8. 9: Distribution of claims paid according to extent of injury – p. 171: Source: HSRC Report)

(Figure 26. 3: Injuries with the highest impact on the compensation system – p. 802 ) A Most Frequent Injury B C Greatest Expenditure Greatest on Compensation by Compensation Paid to Injury Category Individual Claimants Sprain & strain of the neck Sprain & strain of the Injuries to nerves & neck spinal cord Fracture lower leg Fracture vertebral column Superficial injury to head Fracture of upper leg Amputation of foot Superficial injury to face Intracranial injury Fracture upper leg Fracture pelvis Fracture of upper back Dislocation of back Sprain and strain of back Fracture of ribs Amputation of forearm

Distribution of Claim Size

Categories of compensation

(Figure 8. 13: Distribution of compensation paid per compensation category 1999 – p. 174: Source: HSRC Report)

The 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 -

Time Period (Figure 17. 9 Average years from accident to settlement, according to seriousness of injuries Vol. 3, p. 188)

(Figure 12. 1 Utilisation of RAF Income: 1999) p. 282 1999 RAF Income (Fuel Levy & Investment) R (million) 2, 285 Utilisation of RAF Income Rm % Compensation 1, 449 64 Transaction Costs * 483 21 Other 55 2 Surplus Transferred to Reserve 298 13 Total 2, 285 100 * Transaction costs: 483 - 21% RAF Admin expenses 129(6%) RAF (Legal & Experts) 125(5%) 227(10%) Claimants (Admin, Legal & Experts)

(Figure 12. 1 Utilisation of RAF Income: 2001) p. 283 2001 RAF Income (Fuel Levy & Investment) R (million) 2, 388 Utilisation of Reserve 342 2, 730 Utilisation of RAF Income Rm % Compensation 2, 055 75 Transaction Costs * 619 23 Other 56 2 Total 2, 730 * Transaction costs: 100 619 - 23% RAF Admin expenses 179(7%) RAF (Legal & Experts) 134(5%) Claimants (Admin, Legal & Experts) 306(11%)

Distribution & Transaction Costsp. 284 Total: R 620 million (100%) RAF Total: R 313 million (50%) RAF Administrative Expenses R 179 million (27%) RAF Capital Expenditure R 4 million (1%) RAF Attorneys and Advocates R 96 million (16%) Experts R 34 million (6%) Claimant Total: R 307 million (50%) Claimant, Administrative and Legal Representatives: Attorneys and Advocates R 217 million (35%) Experts R 90 million (15%) Attorney-Claimant Agreement Administration; Legal; Experts Unknown

Abuse q False Claims q Exaggerated Claims q Opportunistic Claims q Fraud within the RAF q Legal Malpractice Chapter 13

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 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

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

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

Lump Sum Compensation vs Periodic Payment of Benefits. Chapter 21 q Promote Finality q q Independence & Dignity of Claimant Guesswork and False Prophecies q Under Compensation q Facilitate New Life Style q Over Compensation q Inheritance for Beneficiaries q Process of Calculation Increases Cost q Process of Calculation Causes Delay q HIV/AIDS q Utilization of Award q Funding Litigation