No-Fault Policy: briefing by Department of Transport

Meeting report

Briefing by the Department of Transport (DOT)
Mr Jeremy Cronin, Deputy Minister of Transport, presented the background to and an overview of the introduction of a No-Fault Policy with regard to the Road Accident Fund (RAF).

Since the RAF was established in 1942, the legal framework remained unchallenged but the problems with administering the Fund had increased exponentially.  The purpose of the RAF was to provide financial assistance to persons who had been injured and to the surviving dependents of persons who were killed in road accidents.  Despite amendments to the legislation governing the RAF in 2005, the Fund remained in crisis and the current total of pending claims amounted to approximately R41 billion.

Since 1942, seven commissions of enquiry had investigated the RAF and the Road Accident Fund Commission submitted a comprehensive report to Parliament in 2002.  The findings and recommendations of this report formed the basis of subsequent attempts to address the problems with the RAF.

The main concerns identified by the RAF Commission included the finding that the RAF was financially unsustainable.  Since 1996, the Fund was more accessible, with a resultant increase in the number of claims submitted.  Another major factor was the fault-based nature of the RAF as the admission of claims depended on proving that the victim of the accident was not at fault.  This aspect resulted in the processing of claims being a very complicated and long-drawn out process that required extensive legal involvement.  In general, it was found that only 50% of the benefits paid out by the fund were compensation for the victims, with the remainder of the payouts being swallowed up by legal fees.  The RAF claims placed a heavy burden on the court system and currently there were approximately 11,000 RAF cases on the roll at the Cape Town High Court.

Claims against the RAF took a long time to finalise, resulting in financial hardship for the dependents of victims who were the breadwinners of their families.  The payment of compensation as a lump sum had unintended consequences as victims of road accidents were encouraged to remain un-rehabilitated.

The RAF was intended to be an extension of the social security net.  Because the Fund was not properly integrated into the social security system, there were problems with claimants “double-dipping” (i.e. one person claiming for more than one type of benefit for the same reason) and instances of fraud was suspected.

Analysis of claim payments indicated that most of the money paid out was for minor injuries.  Another perversity was the disparity between the amounts paid for legal costs versus medical costs.  For example, in 2008, an amount of R2 billion was paid for legal costs but only R776 million went towards medical costs.  It was estimated that only 10% of payment for medical costs went into the public healthcare system.

The RAF Commission recommended that the Fund was changed to a benefit scheme and that a No-Fault Policy became applicable.  The Taylor Committee on Comprehensive Social Security System for South Africa in 2002 agreed with the recommendation.  Although Government agreed to the recommendations in principle, not much progress had been made to date.  There was a general acknowledgement that the RAF faced enormous problems and the focus over the previous ten years had been on problem-solving.

The DOT had produced a draft policy document, which would be published in the Government Gazette on 12 February 2010.  The draft policy document was intended to be a discussion document.  By April 2010, a review of the comments received could be undertaken and the process of preparing draft legislation, establishing the administrative institution and acquiring the necessary funding could commence.  It was anticipated that the Bill would be presented to Parliament in 2011.  The proposed changes to the RAF were expected to be complicated and a degree of resistance from entrenched vested interests was anticipated. The broad support of the Committee during the entire process was considered to be essential. 

Dr Maria Koortz, Deputy Director-General (Transport), DOT, introduced the delegates from the Department, Messrs D Pillay (Director), H Matthews (Acting Chief Director) and T Gow (RAF Project Manager).  The RAF were represented by Messrs M Mvelase (Executive), A Germandt (Chief Financial Officer) and Ms L Steele.

Dr Koortz pointed out that the issues concerning the RAF were not new.  Since its inception in 1942, the Fund had been subjected to major challenges because it was too costly.  Nevertheless, the Fund had to be properly managed in order to promote the interest of the public.  The RAF could not simply be scrapped as the privileges of citizens can not be taken away.  The RAF had to be one of the supporting pillars of the social security system, was intended to provide support for the less-privileged sectors of society and to boost the National Health Insurance policy of the Government.  The proposed changes to the RAF made provision for service providers in the health sector to provide immediate assistance to victims of road accidents.  The proposals encouraged the rehabilitation of persons injured in road accidents and moved away from lump sum handouts to victims.

The Department had conducted extensive consultations with other affected Government Departments.  A degree of resistance from the legal fraternity was anticipated but the proposed changes to the RAF was expected to generate much interest as everyone was involved through the payment of the fuel levy, which provided the funding for the RAF.

The restructuring of the RAF had commenced in 2008 and a limitation on the amount of claims for less serious injuries had been introduced.  The Department planned to consult all the role players, to examine the funding model for the RAF, to consider the enhancement of the benefit cover offered, to focus on the provision of trauma care and to introduce certain exclusions during 2010.

Mr Terence Gow briefed the Committee on the proposals for the No-Fault Road Accident Benefit Scheme (see attached document).

The presentation included an overview of the current function of the RAF, the compensation benefits provided by the Fund, the current problems with the Fund, the past interventions to address the problems of the Fund and the history of the investigations into the RAF.

An outline of the policy proposals for the Road Accident Benefit Scheme of South Africa (RABSA) and the implications on the healthcare system was presented.  The briefing was concluded with a list of the entities consulted by the DOT to date and the financial implications of the proposed RABSA.

Discussion
Mr S Farrow (DA) remarked that the proposed restructuring of the RAF could have significant implications on the staffing profile of the Fund.  He asked if the DOT planned to introduce new legislation for RABSA or intended to amend the existing legislation.  He asked if the Department had developed a funding model for RABSA.  He was aware of the report issued by the RAF Commission but does not recall having seen the Taylor Commission’s report.  He questioned the ability of State institutions to take on the additional responsibilities for RABSA and remarked that the Department of Health was already under significant strain.  He recalled that the Committee had requested a definition of “serious injury” from the Department but the definition had not yet been provided.  He observed that the proposals to change the RAF could be expected to generate many common law issues and hoped that all the stakeholders and interested parties would be afforded the opportunity to interact in the development of RABSA.

Ms P Ngwenya-Mabila (ANC) asked if the proposals included the recommendation that foreign visitors were compensated in foreign currency for injuries sustained in road accidents in South Africa.  She noted that drunken drivers would not be compensated for injuries sustained and asked if the same would be true if a drunken pedestrian was knocked down.  She asked if the taxi associations had been included in the consultations held by the Department.

Mr M De Freitas (DA) asked if a cost analysis and a funding model had been completed by the Department and if a copy was available for the Members of the Committee.  He asked for further information on the handover phase and what would be done about the outstanding claims submitted to the RAF.  He asked if the recommendations of previous commissions of enquiry and international experience had been taken into account in the drafting of the proposed RABSA.

In response to Mr Farrow’s questions, Mr Cronin acknowledged that there were issues around the current staffing of the RAF and that of the proposed benefit scheme.  The administration of RABSA required a different approach and a different staff profile.  The Department was sensitive to the matter and had held preliminary discussions with the affected trade unions.  The existing RAF would not fall away when RABSA took effect. The phasing-out of the existing RAF was expected to take some time and a lengthy “sunset” period was anticipated.

Mr Cronin confirmed that a new foundation Act would be formulated for RABSA but the RAF Act may require amendments to enable the Fund to correct some of the problems in the interim.

Mr Cronin reported that National Treasury was assisting the DOT with developing a funding model for RABSA and details had been provided in the discussion document.  Indications were that a small increase of 4 cents per liter in the fuel levy might be required.  He remarked that it was an ongoing battle to reduce the numbers of road accidents and injuries in the country.  Under RABSA, the entire amount collected through the fuel levy will go towards providing benefits to the victims of road accidents and result in a saving in expenditure for health care.

Mr Cronin acknowledged that the lack of capacity of affected State institutions was cause for concern.  The RAF currently suffered from a chronic lack of funding and RABSA was expected to have a far lighter administrative footprint and have a far lower administration cost.

In response to Ms Ngwenya-Mabila’s questions, Mr Cronin advised that the definition of benefits was a complicated area but there was a process in place to deal with the matter.  The Amendment Act of 2005 removed the ability of accident victims to claim the balance of injury claims from the perpetrator and the Department hoped that the current case before the Constitutional Court would provide guidance on the issue.

Concerning claims by foreign visitors, Mr Cronin noted that the RAF had received substantial claims for compensation from foreign nationals in the past and had introduced a cap on the amount of claims as a result.  He confirmed that claims will be paid in South African Rands and that benefits were limited to compensation for medical expenses incurred and did not include any future loss of earnings.

Mr Cronin reported that there were claims that a No-Fault Policy encouraged undesirable behaviour.  The Department was sensitive to the issue but other social limitations were in place.  The intention was to provide immediate medical care to all accident victims, even if they were under the influence of alcohol but other benefits would not be available.

Mr Cronin confirmed that the DOT had limited consultations to other affected Government Departments but that the consultation would now be extended to the other key stakeholders as well.  He confirmed that the reports of the earlier commissions of enquiry and international experience had been taken into account.

Dr Koortz advised that the 2005 Amendment Act had been implemented in 2008.  She offered to brief the Committee on the Taylor Commission’s report, which dealt with a comprehensive social security system for South Africa.  The formulation of exceptions and exclusions was an important matter and would include self-inflicted injury in addition to driving under the influence of alcohol.

Dr Koortz confirmed that, although some consultation had taken place, much more would be done during the process of drafting the legislation.  She anticipated major challenges and wished to obtain input from all the affected parties.  She gave the assurance that adequate time will be allowed for comment.

Dr Koortz advised that as RABSA was a benefit scheme, the definition of “serious injury” was no longer required.

The Chairperson thanked the presenters for their input and assured the Department of the continued support of the Committee.

The Committee approved the minutes of meetings held on 13 October 2009, 27 October 2009, 28 October 2009, 3 November 2009 and 17 November 2009.

The Committee discussed the necessity to conduct oversight visits to municipalities, implicated in recent adverse media reports on dangerous potholes in roads.  A previous request from the Chairperson to conduct such visits had been turned down by the Parliamentary Committee Section.  Members of the Committee were unanimous in their support of the Chairperson’s view that the Committee had an oversight responsibility in this regard, despite the appointment of an Ad-hoc Committee to investigate the lack of service delivery by municipalities.  The Chairperson ruled that the oversight visits were again placed on the Committee’s programme for the first quarter of 2010.

The meeting was adjourned.