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TRANSPORT PORTFOLIO COMMITTEE
13 April 2005
ROAD ACCIDENT FUND AMENDMENT BILL: HEARINGS
Documents handed out:
SA Insurance Association submission
Law Society of South Africa submission
Briefing by Law Society of South Africa
Quadriplegic Association of SA submission
Cutting from the The Highway Mail on QASA campaign
QASA campaign bumper sticker
Clemans, Murfin and Rolland submission
Thea Coetzer (occupational therapist) submission
SA Medical Association submission
Johan Hattingh and Alexander Forbes Compensation Technologies submission
Proposed amendments to Road Accident Fund Amendment Bill – proposed changes by the Department as gazetted on 26/11/04
Original Road Accident Fund Amendment Bill [B64-03] as tabled in 2003
Representatives of the SA Insurance Association, SA Law Society, the Quadriplegic Association of SA, Netcare and the SA Association of Personal Injury Lawyers, made oral submissions on the Road Accident Fund Amendment Bill.
The Insurance Association was in favour of limits ton the compensation offered by the Road Accident Fund (RAF). The right to sue the transgressor for additional recompense should remain. The insurance industry was prepared and competent to assist in assessing losses and/or damages.
The Law Society stressed the important role of attorneys in representing the interests of accident victims. The comprehensive protection afforded by the RAF, at an average fuel levy cost to road users of R60 per month, should remain but the management of the Fund should be contracted out to private industry. Proposed changes to the RAF appeared to be piecemeal with little thought behind them. Proposed limits to benefits were unrealistically low, and compensation by instalments instead of lump sums was unacceptable.
The Quadriplegic Association was actively engaged in various activities to improve the lives of quadriplegics and paraplegics. They considered the proposed limits on benefits for severely disabled victims of road accidents as unrealistic, saying that the amount of money involved was a ‘mere drop in the ocean’. Non-medical caregivers were entitled to fair compensation from the Fund. After the QASA presentation, Members discussed capping; how the RAF was seen by society; lump sum payments and trusts; and dealing with the children of deceased accident victims.
Netcare, South Africa’s largest provider of private healthcare services and the RAF’s largest creditor was concerned about the amendments’ effect on hospital and medical expenses and that the wording in the Bill relating to the National Health Reference Price List could lead to discounts for the RAF. They were also concerned about the intent of the Bill and the removal of rights to use an attorney by claimants. The RAF’s slow payment of bills was mentioned. Members went on to discuss medical funds; accessibility of private healthcare in rural areas; Netcare’s policy on treating patients without medical aid; the RAF’s outstanding accounts with Netcare; and Netcare’s concerns with the Bill.
The SA Association of Personal Injury Lawyers expressed concern about the reduction of benefits and discussed ways for the RAF to utilise their resources better. The absence of foreign claims in the Bill was also highlighted by SAAPIL. They felt that car owners should bear responsibility for accidents and that the monitoring of traffic should be improved. They also welcomed the extension of the arbitration and mediation system. They outlined the different kinds of damages awarded to victims.
The Chaiperson gave a brief summary of RAF liabilities under the headings of: General Damages; Loss of Earnings/Income past and future; Loss of Support past and future; Medical Benefits past and future and Funeral expenses. Legal costs accounted for 29%, Medical expenses for 10% and Compensation for 61% of total expenditure of the RAF.
SA Insurance Association submission
Ms C da Silva (Executive Director) stated that her association felt that road accident fund compensation should be offered on a limited liability basis as was the case in the private sector and as was the trend world-wide. In a developing country such as South Africa providing unlimited benefits or compensation to road users was unaffordable, unreasonable, inequitable and unsustainable. The dilemma of the RAF was that it was expected to be a hybrid between insurance and social compensation. The accident rate In South Africa was too high along with the high incidence of crime. Improving road safety was a priority. According to her Association’s research, 60% of drivers in South Africa were uninsured. The right to sue the transgressor for additional recompense in the case where a shortfall in compensation from the RAF arose should remain. Panels of experts to assess damage and/or loss would be too complex and cumbersome, and the insurance industry should be asked to help.
Law Society of SA submission
Mr R Bobroff (Vice-President) mentioned that there were 14 000 attorneys in South Africa. It was imperative that accident victims were represented. Only attorneys could represent claimants. Their fidelity fund protected their clients from unscrupulous attorneys. There were 170 000 claims per year. The Insurance Act dated from 1946 when it was attempted to provide the widest possible protection, but with limitation of the rights of black people, such as taxi passengers. Money brought a degree of comfort (solatum). Workmen’s compensation had collapsed and it was known that there were 100 000 unopened applications in line for processing. The current road accident insurance system based on a fuel levy cost approximately R60 per month per vehicle for full cover. This system should be maintained but with improved management. Proposed changes seemed piecemeal with little thought behind them. Australian practice was not applicable to South Africa as there was little correlation of conditions of literacy, accident rate, and income. Benefits should be capped, but top-up insurance should be available. Choice of service provider should be accorded the accident victim. The discrimination against (taxi) passengers should be removed. Funds to minors should be invested in a trust. The limit of R2, 5 million on claims was inadequate. In terms of customary law in some marriages there might be more than one wife, and in some cases the wife was the breadwinner that had to be taken into account in identifying beneficiaries. The cost of burial fixed at R 5 000 should be reconsidered because in real life this could be lower or higher. Citizens from the Southern African Development Community (SADC) countries working in South Africa should be included in the road accident insurance system. In the United States, United Kingdom and some states in Australia there were no limits to compensation. The RAF should pick up the first tier and the state must provide a cap-up system. RAF administration - a R6 billion business - should be privatised by being put out to private tender as was done so successfully with the Airports Company of South Africa. Payment of benefits by instalments was unacceptable because financial implications were unknown and the administrative burden of implementation would be prohibitive. In cases where attorneys were to "buy" clients, the Law Society would clamp down on them.
Quadriplegic Association of South Africa
Mr A Seirlis (National Director) stated that their Association had 2 000 paid-up members. There were 10 000 paraplegics in the country. The Association had its own hospital in Port Elizabeth with 35 beds and was involved in driver training. 78 were trained during 2004, and 132 learners were supported. Their "Bags of Hope" campaign had provided a starter pack rucksack containing information. They cooperated with Arrive Alive in a Buckle Up campaign. Of 640 spinal chord injuries in 2004, 250 were due to road accidents. Different tiers of compensation were required, and civil claims should be allowed to top up compensation for general damages. The total amount involved in compensation for severely disabled people was a drop in the ocean. Non-medical service providers such as care attendants were entitled to a realistic tariff. They supported a lump sum payment, and that the patient and not the service provider be paid out.
Mr Farrow (DA) enquired about QASA’s suggestion regarding capping. Mr Seirlis said he would not cap at all. He would look at the circumstances to come to an amount.
Mr Mashile (DA) asked how society was seeing the RAF. He was not sure if society was seeing the RAF as a super insurance institution or a social security network. He said it looked as if they were trying to replace insurance facilities by the RAF. Mr Seirlis that they were not seeing that poor people were less injured and the rich more severely injured. They never saw the fund as a potential income generator. They were receiving into their membership injured on the road who were not coping and who needed support. They understood the needs of severely disabled people and they felt that if they lost the benefits their chances of survival were slim. QASA were supporting the Department of Transport for free. The proposed amendments would cause much more suffering. If a person was injured, the gap between rich and poor narrowed very quickly.
The Chairperson said that a cap of R100 000 was not taking the realities of the disabled into account. He understood that QASA thought tariffs would be unrealistic. They were not concerned with tariffs in principle, but on its clarity in the proposed amendments. The Chairperson understood that QASA thought tariffs should not be arbitrary and draconian.
Mr Seirlis said that the Chairperson understood them correctly. If tariffs were not sufficient, people would not get the service they needed.
Ms R Mashigo (ANC) enquired about the minor dependents of victims. Mr Seirlis said general damages should belong to the family of the victim. Loss of earnings payments should not cease on the death of a victim, as they would need further help. In South Africa people with spinal cord injuries did not live as long as they should. The Chairperson said lump sums were paid currently, but incremental payments would affect people negatively. Ms Mashigo was not satisfied by the answer. She wanted to know what would happen if only minor children of the victim were alive. The Chairperson said it was not appropriate to ask QASA. It would be put to the RAF or the Department of Transport. He agreed that it needed to be thought through. Lump sum payments were made, but there were complexities because of the amendments.
Mr Green (ACDP) asked about the experiences of people who received lump sums. He asked if a portion of the payments should be put in trust funds. Mr Seirlis said there have been a few persons who had gone through RAF claims quickly. He said he was not against instalments if there was a defined start and end basis. It would be acceptable to be between 12 and 18 months. The ownership of these funds should belong to the recipient, and when he/she died, to the family and not the RAF.
Mr Mark Bishop, Netcare’s Group Funder Relations Manager, said that Netcare was the largest provider of healthcare services in South Africa. They were also the largest single creditor to the RAF. They treated many people who had been in accidents.
Netcare were concerned about the Bill’s provisions for hospital and medical expenses, as well as tariffs. They were concerned about the wording of the provision for the National Health Reference Price List. If the wording were to be used, it could force a discount. Mr Bishop said more talks were needed on the terms of payment. Netcare would accept medical aid rates.
There was the possibility that only people with medical aids would gain access to private hospitals, because the RAF was not paying. The National Health Act (Section 90(1)(v)) indicated that the Director General of Health could publish reference price lists for the private healthcare industry; however, the section clearly indicated that such price lists were "not mandatory."
Mr Bishop said Netcare welcomed the changes regarding emergency medical treatment. However, they were concerned that the extension of cover to all persons injured regardless of "blame" was of great benefit to the injured persons but did not reduce the risk to the providers. Providers would still only be assured of payment during the emergency stage and when this period ended was still unclear in the amendments. It was also unclear what risk a private provider faced if a patient could not be transferred to a state facility once the emergency stage was deemed to be over.
Netcare had questions surrounding the intent of the amendments. They understood that the intent of the amendments was to manage the costs of the RAF and to ensure its sustainability. They were concerned about the attempt to reduce what would be paid out. Mr Bishop said that RAF patients were less than 1% of their business. If the intent of the Bill were to discount services, it would be nonsensical.
They were also concerned about the removal of the amendment of the right to seek council. Mr Bishop said if the RAF would not pay, he did not know how a person without resources would be paid. Netcare believed that the majority of RAF patients treated by their facilities were not able to understand the vast quantities of red tape associated with making a claim against the RAF and making them responsible for the legal costs appeared to restrict their entitlement to fair compensation.
Mr Bishop asked the Committee to apply their minds to the provisions for reasonable compensation. He was also concerned about the ability of the fund to pay. Medical private tariffs were in danger and the wording had to be addressed.
The Chairperson asked if the medical aids covered road accident victims effectively. Mr Bishop said he knew of no instance where the medical aids did not honour their duty.
Mr Mashile asked Mr Bishop if the Bill should resolve the administrative issues in the RAF. Mr Bishop said that legislation could not be passed to fix administrative problems. He would say privatisation would be an easy solution, but not the final answer.
Mr Mashile asked if provisions for private healthcare would not drive people to private instead of state hospitals. Mr Bishop said yes and no. He knew the state had capacity problems in term of healthcare.
Mr Mashile enquired about the accessibility of private healthcare in rural areas. Mr Bishop said that there was certainly not access to private healthcare in the rural areas. Most of the RAF victims were in the urban areas, because that was were the most cars were.
Mr Farrow asked for a credit figure and if Netcare had any processes to ensure payment. Mr Bishop said they used an outside administrative company to mange an account of R20 million, which had been outstanding for two years. In house, they manage R100 million. They were in constant engagement with the RAF. They were not as successful as they would have liked.
The Chairperson asked if their specific concerns were with the national price list and that they were not opposed to some form of tariff system, but not as it was currently described. Mr Bishop replied in the affirmative. If the RAF paid in 30 days, they would get some form of discount. It would be difficult to fix administrative problems with legislation, and it seemed that the Bill was trying to limit liability. Mr Bishop said anything around medical aid rates, provided it was paid in 30 days, would be reasonable tariffs. He would be quite happy to talk about lower rates. He reiterated that he was only talking on behalf of his organisation.
A Member asked how Netcare as a service provider dealt with an RAF victim when they realised that the person was not covered by a medical aid. Mr Bishop said they would do some investigation, and if the person was not covered by a medical aid, they would claim from the RAF. They had a policy of not going after people who could not pay.
SA Association of Personal Injury Lawyers
SAAPIL had over 1 000 members. Mr Johan Trengrove started by saying that the concept of car owners paying for the RAF through petrol levies was very sound. Personal insurance was very expensive.
SAAPIL’s first concern was that the reduction of benefits would lead to tremendous pain, and there were no indication what the benefit of this reduction would be to the fund. Mr Trengrove said the pain that would be caused was very real, and it would be the weakest members of society that would suffer most. There appeared to be many other ways the fund could employ to save money that were not really addressed by the Bill. Evidence suggested that the Fund’s legal expenses were much more than they should be. Much money could be saved which would allow resources to be spent in other ways. The Fund should clean up its act so that the victim did not struggle to pay.
Mr Trengrove said foreign claims were not addressed in the Bill. There were rumours of large foreign payments, for example a payment of R30 million to an American baseball player injured in South Africa. He suggested that foreign payments be capped in the Bill to avoid such cases. It would be another way to lower costs.
Mr Trengrove said car owners in South Africa were people with more money than the average person. A car was a dangerous object. He did not believe it was unfair to say that car owners, who as a group, caused damage, should be asked to pay reasonable damages. He could not see why people should not get reasonable compensation. Much had been said about overseas systems, where patrolling was much more effective. This was not the case in South Africa. South African drivers had to be taught to drive slowly and respectfully. Other countries had tremendous social safety networks. Therefore, South Africa should not scale down its Road Accident Fund because it was done in other countries.
Mr Trengrove presented a document describing the different payments for damages and how each would be affected by the Bill. The different components of damages were: medical expenses; future medical expenses; past hospital expenses; permanent disability; and general damages.
Mr Trengrove said that general damages were very important, especially for the disabled, who needed to buy many things.
Under the current Act, the RAF would pay all medical expenses. Under the amendment Bill, the RAF would only pay a tariff, which could be much less. This would mean that the injured victim would be sitting with extra debts to pay.
Mr Trengrove said the capping of R100 000 would mean that only the seriously injured victims were going to take the financial pain.
Mr Trengrove said that the reference to R25 000 in clause 18(2)(a) should be deleted.
The arbitration and mediation system had been very successful. He welcomed that it would go nationwide. It could still be considerably improved. The problem with court cases and judges were that RAF cases were not a priority. Mr Trengrove suggested that a tribunal for RAF cases would be to the benefit of the system. Arbitration had shown that cases could be settled effectively; it provided scope for saving a great deal on legal costs. SAAPIL could see many problems coming from the amendment Bill, while the benefits were murky.
The Chairperson asked that Members apply their minds to what they were trying to achieve with the Bill, whether it would be equity, bottom line funding or transformation. His personal view was that it would not be one or the other, but they had to be clear. They were not ready to change to Judge Satchwell’s proposal. The Chairperson said all agreed that there were problems with the Fund. He wondered if the amendments would assist in making it better run, and if legislation was the best way to do so. He asked the Committee to remember the previous Transport Portfolio Committee’s work, as many of the issues came up again.
The Chairperson said they would have to hear more on the issue of medical tariffs. Foreign claims disappeared from the Bill, but they were dealt with in the capping, and perhaps the Committee had to go back to the issue. Emotional shock was not a big issue, but it should be dealt with. They also had to look very seriously at the equity issue, as it would have cost implications. There were new governance issues, involving other stakeholders, which had to be looked at.
The Chairperson said that the big issue was the liability of the fund. It opened up issues of unconstitutionality. They needed to hear from the Department of Transport and the Fund when Parliament reconvened. The Department had a big challenge in motivating the limit of liability. There could be other ways of addressing the issue.
Mr Farrow asked about the way forward. He referred to the September document. He assumed that it would have to be merged into a more concise document, as they reached a point of consensus on many of the issues. The Chairperson said that the Committee had to assume responsibility for the legislation. He envisaged that they would not have parallel processes. He suggested that they refreshed their minds on the drafting the previous Committee had done. There should not be several documents and drafts floating around. Once the hearings had been completed, they should get down to drafting the legislation. He suggested that that they should not have another round of hearings, unless needed. They could always call on the private sector when needed.
Mr Green (ACDP) expressed concern about the inability of the Fund to perform. He was not sure how they were going to deal with the matter in the amendments. It needed urgent attention. The Chairperson agreed. He said that the question of whether the administrative problems could be solved through legislation had been asked. He reminded Members that the Committee had other responsibilities too.
Mr Farrow mentioned the aspect of governance. The Chairperson said when they came to governance, he would like to bring in the Board of the RAF. It was very important to have a better understanding.
The meeting was adjourned.
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