A collapse of the Road Accident Fund (RAF) would have dire consequences, making drivers personally liable for negligent actions and leaving road traffic collision victims unable to recover damages.
Therefore, aspects of the current Road Accident Fund Act require revision. In the short term, the government must bail out the RAF to ensure the objectives of its legislation are met.
This is according to professor Hennie Klopper, an Emeritus Professor in the Department of Private Law Law at the University of Pretoria and author of Third Party Compensation and RAF Practitioners Guide.
Klopper made it clear that the road traffic crash victim compensation system is in crisis.
He said while it is clear that the RAF is experiencing financial problems, much attention is being devoted to the current RAF management’s attempts to solve these issues.
These range from the reclassification of the road traffic collision compensation system as a social benefit scheme, to advocating for the restriction of medical cost payments funded by medical aid, compensation for foreigners and high-income earners, and the removal of attorneys from the claims process.
This raises the question of whether these measures will effectively turnaround the fortunes of the RAF. To answer this question, Klopper said a review of the factors that contributed to the current RAF crisis is necessary.
According to him, three factors determine the fortunes of the RAF: the level of risk to which the RAF is exposed, the funding level, and the efficiency of the RAF’s execution of its statutory obligations to investigate and finalise claims.
“Risk exposure is seldom discussed but is fundamental to evaluating the RAF's financial outlook. Strangely, this aspect has not been a point of discussion in measures to improve the RAF’s well-being.”
Klopper said the system has faced numerous commissions of inquiry, yet none has considered the upstream threat that risk poses to the RAF.
“It appears that the level of risk that the system faces has been viewed as both acceptable and inevitable. This view is supported by a conclusion from the Melamet Commission of Inquiry, which recommended raising the fuel levy to R3.30 per litre. The 2002 RAF commission proposed a social benefit scheme, subject to affordability.”
“If we analyse the risk factor, it becomes clear that it requires serious consideration,” Klopper said.
He explained that the RAF is liable to compensate for road traffic crash injuries and deaths caused by negligent driving. The higher the incidence of road traffic collisions, the greater the RAF's financial exposure.
South Africa’s record in this regard is dismal, Klopper said. “According to the Road Safety Annual Report 2017, South Africa has the highest fatality rate per 10,000 vehicles among 40 countries. The annual road traffic collision fatality rate has remained at about 14,000 deaths per 10,000 vehicles.”
“Independent analysis of unnatural deaths suggests that the fatality rate is approximately 20 per 10,000 vehicles. Road traffic collision incidents result in around 370,000 injuries annually, with about 73,000 classified as serious.”
Klopper said road traffic accidents generate approximately 100,000 RAF claims each year (107,000 in 2023), which must be handled by the RAF’s staff, of which only 457 are professionally qualified. “These incidents cost the South African economy about R186 billion annually and affect the lives of about 2 million South Africans.”
At its inception in 1942, the compensation system was driven by compulsory insurance. Every vehicle owner or driver was legally compelled to take out insurance with designated companies to cover their liability for injuries or deaths caused by negligent driving.
However, Klopper explained, because of increasing claims liability, some insurance companies faced liquidation. Before 1986, the claims level necessitated a drastic increase in insurance premiums. The government appointed a commission of inquiry to provide recommendations.
Due to the required premium levels, the government opted to convert the compensation system from insurance premiums to one funded by an initial fuel levy of 6 cents per litre, rather than increasing premiums.
“This change did not alter the basis or level of compensation or claims procedures. The fuel levy has advantages over insurance: payment is unavoidable, thus eliminating uninsured vehicles, and it is equitable as payments depend on distance travelled and fuel consumed.”
“However, the fuel levy has economic and political limitations. Any increase in the levy has economic ramifications and may provoke political reactions, including public protests from taxi operators and commuters due to increased costs.”
Klopper further explained that additionally, it is a decreasing resource due to the adoption of fuel-efficient technologies and the impending decline of the internal combustion engine, which policymakers have yet to address.
“In light of these circumstances, the continuous increase of the fuel levy to meet the financial demands of the compensation system is not a viable or sustainable solution.”
Klopper said initially, all claims were managed by 13 designated insurance companies, each with its own claims department. After the system's conversion from premium funding to levy-driven, these companies acted as appointed agents of the then MVA Fund, which was later renamed the RAF in 1996.
“This concentration of claims in one channel created distinct challenges,” Klopper added that the RAF Commission Report of 2002 highlighted the need for a complete overhaul of the RAF, recommending its scrapping and the establishment of a new claims administrative body.
“The RAF administration is characterised by instability and frequent changes, with CEOs appointed for five-year terms and the political head of the organisation subject to change.”
Due to the increasing claims burden, each incoming management team has devised unique turnaround strategies, often leading to adverse effects.
Klopper explained that examples of these measures include Introducing more claims handlers and fewer claims assistants, negatively impacting productivity and increasing litigation.
Accepting and paying suppliers' claims without corresponding personal claims being lodged and withdrawing all existing settlement offers in 2004, leading to a flood of summonses, were also problematic.
Unilaterally implementing payments in instalments for loss of income without proper authorisation or administrative capacity, resulting in unnecessary legal costs, is another problem, he said.
Klopper also questioned the capping claims for non-patrimonial loss through arbitrary lists, informing staff that deviation would lead to disciplinary steps.
He said the current management has perpetuated these trends, introducing measures such as:
Reclassifying the compensation system as social security, creating an illusion of financial soundness, which was rejected by the Auditor-General.
Non-renewal of contracts with RAF attorney panels without an effective strategy to deal with defended claims.
Proposing restrictions on the rights and compensation of road traffic collision victims.
Implementing self-help measures that shift obligations onto claimants, which are legally the RAF's responsibility.
Refusing to pay compensation for medical aid expenses while excluding claims from undocumented foreigners and high-income earners.
These policies have adversely affected the finances of the RAF, Klopper said. “The 2004 decision to entertain claims only if summons had been issued led to excessive legal costs, amounting to R48 billion over two decades.”
He explained that this policy created a culture of litigation in the compensation system, compelling claimants to issue summonses to protect their rights. A survey of the Gauteng High Court, Pretoria in 2021 indicated that approximately 75% of cases on the court roll were RAF matters.
Attempts by the current management to address these challenges have been largely ineffective, Klopper said. “The non-renewal of RAF panel attorney contracts in 2020, without a credible strategy for existing claims, has forced courts to address claims that the RAF should manage. This has resulted in increased average compensation awards for claimants and a significant legal bill for the RAF, which does not envision litigation as part of its operations.”
According to him the “self-help attitude” of the current management, introducing measures without Parliamentary sanction, has threatened claimants' rights to compensation.
“Furthermore, the RAF's interpretation of the RAF Act has led to litigation losses, which it refuses to accept, claiming bias against the courts. Its refusal to pay legally due medical expenses has created further contingent liabilities.”
Klopper said the drive to limit compensation will likely have minimal impact, as foreigner fatalities constitute 12% of all road traffic collision fatalities and 11% of compensation paid by the RAF.
“Claims from foreigners should be expedited to avoid volatile foreign exchange issues, but the anecdotes cited by management are outdated. Additionally, limiting claims for high-income earners ignores existing caps on loss of income and earning capacity.”
Solutions that have been mooted are the Road Accident Benefit Scheme as recommended by the 2002 RAF commission. There have also been calls for the re-introduction of compulsory motor vehicle insurance.
“The Road Accident Benefit Scheme proposed a no-fault liability with defined benefits. Given the current level of claims resulting from road traffic collisions based on fault, it is obvious that doing away with fault will exponentially increase the number of claims to an unmanageable level.
Klopper said In addition, the introduction of any new system will require a period of change-over funding where two systems will run concurrently.
These two factors make the introduction of a no-fault based compensation system financially unviable and was the fundamental reason why Parliament in 2020 rejected the Road Accident Benefit Scheme Bill,” Klopper said.
He explained that compulsory insurance over the past 44 years has proven expensive, delivering only 40 cents of compensation for every rand collected in premiums, primarily due to administrative costs.
“This model also results in uninsured vehicles, disadvantaging road traffic collision victims. The annual premiums required to cover RAF financial exposure could range from R10,000 to R20,000, likely out of reach for the average vehicle owner.”
This leads to the conclusion that the current system is the only viable option, Klopper said. “The system has three cost-generating components: the level of road traffic collision fatalities and injuries, the need to prove fault, and the establishment of required compensation. Reform must target all these components.”
He added that South African road safety has not improved significantly, with consistent fatality figures. According to Klopper, urgent measures are needed to enhance road traffic policing and law enforcement, as current campaigns have not yielded substantial results.
“Experience shows that delayed claims administration leads to expensive litigation and drains on compensation funds. An administrative system that limits litigation is necessary. Research indicates that establishing fault generates considerable costs, while customising compensation packages also consumes funds. Digitising the claims procedure and utilising cloud-based documentation for claims could yield significant cost savings.”
According to Klopper, the criteria for serious injury determinations must be revisited to avoid delays and costs. “Aspects of the current Act require revision, including restrictions on loss of income and support and the requirements for hit-and-run claims.”
He said currently, claimants face uncertainty due to the RAF's issues. “They experience long delays and difficulties in enforcing their rights. If they succeed, they endure extended waiting periods for compensation.”
In his opinion the government has a Constitutional duty to protect road traffic collision victims, given its failure to provide a safe travelling environment.
Pretoria News