Changes for Road Accident Fund

15 October 2003

The Road Accident Fund Amendment Bill, the major thrust of which is to improve the financial position of the Fund, was presented to Parliament’s portfolio committee on transport this week.

Addressing the committee in Cape Town on Tuesday, Road Accident Fund chief executive Humphrey Kgomongwe said there was currently a mismatch between the fund’s income and expenditure.

“Over the past four years the Fund’s income has grown by about 14 percent while expenditure and claims had grown by more than 40 percent,” he said.

The Road Accident Fund (RAF) is a public entity which was set up to pay compensation to people injured in road accidents and/or to compensate the dependants of people killed in road accidents arising from the negligent use of motor vehicles in South Africa.

The Amendment Bill makes provision for the payment of general damages to claimants in instalments instead of in lump sums. “This will have a positive impact on the Fund’s cash flow and the responsible management of public money”, Kgomongwe said.

The Bill also sets a prescribed tariff for medical expenses payable by the Fund, which will be negotiated with the medical profession and the relevant regulatory bodies.

Kgomongwe said there is currently no control on the amount that service providers charge, which has led to the abuse of the system. He added that the tariff will apply to both the public and private health care sectors.

The amendments also propose that collateral benefits for injury or death be deductible, because at present claimants receive double or even triple compensation. “Presently a claimant is able to access social security, pension, workman’s compensation, the RAF compensation and even UIF and other state-funded benefits”, Kgomongwe explained.

He said that deducting collateral benefits would prevent duplicate compensation and introduce fairness while prescribing categories of deductible benefits.

The Bill also seeks to limit claims by non-residents of South Africa, and to regulate claims for emotional shock.

Kgomongwe said non-residents currently enjoy the same unlimited cover as residents, and that the RAF was exposed to exchange rate risks because these claims were being settled in foreign currencies. “This increases the Fund’s reinsurance premiums and leads to vast outflows of public funds from the country”, he said.

Resolving claims disputes through mediation and arbitration to prevent these going to the courts is also included in the amendments. Kgomongwe said the RAF had initiated an arbitration pilot project in the Western Cape, which had reduced the fund’s litigation costs by 40 percent. “We plan to extend this project to the whole country,” he said.

The Bill further excludes claims by secondary victims for emotional shock. Currently, a person can lodge a compensation claim from witnessing or hearing about an injury or death in a motor vehicle accident. This claimant need not have suffered physical injury or to have been at the scene, which the RAF argues has led to fraudulent claims being lodged.

The committee will deliberate on the amendments, after which the Bill will be presented to Parliament for debate, before it is passed into law.