impact of the proposed road accident benefit scheme
TRANSCRIPT
Road Accident Benefit Scheme
Mantiti Kola
Chief Strategy Officer
04 February 2016
Purpose
•The purpose of this presentation is to provide an overview of the National
Department of Transport ‘s proposed Road Accident Benefit Scheme (RABS) Bill.
• In so doing, the presentation will:
− Provide a quick background on RAF…
− Present a view of where the business of the Fund is…
− Summarise the need for change…
− Provide an overview of the RABS Bill
Bill development
Benefits
− Support the proposed solution…
BACKGROUND
Background
• National public entity (Schedule 3A of the PFMA) -National Department of
Transport
• RAF administers the motor vehicle accident compensation system currently in place
in the Republic.
•Road Accident Fund Act, 1996 (Act No. 56 of 1996) & RAF Amendment Act, 2005
(Act No. 19 of 2005):
− “Payment of compensation in accordance with this Act for loss or damage wrongfully caused by
the driving of a motor vehicle”.
− Provide compulsory cover to all users of South African roads against injuries sustained or
death arising from accidents involving motor vehicles within the borders of South Africa.
− Provide a social security safety net.
− Indemnify, rehabilitate and compensate the injured.
− Promote the safe use of all South African roads.
Corporate and Statutory Form
RAF’s Business Model
Road
Activity
Number &
severity of
accidents
Levy on
fuel
Grants &
investment
revenue
Financial
Position
Volume of
claims
Value of
claims
Third party
costs
Administrativ
e costs
Fuel sold
Revenue
Cost
Social Security Context
Compensation covered by the RAF
• Medical : Past and future expenses
• Loss of Support : Past and future loss of support
• Loss of Earnings : Past and future loss of earning
• Funeral expenses
• Pain & suffering, disability, disfigurement and loss of amenities of life
Where the business is - 2014-2015
173, 743 New Claims registered
284, 079 Individual payments
23, 823 General Damages payments
9, 769 Funeral payments
117, 825 Medical payments
21, 881 Income Support payments
Open claims reduced from 232, 285 to 217, 710
Revenue increased by 10%
to R22,5 billion
Claim payments grew by 24% to
R21.4 billion
Claims expenditure exceeded the net Fuel
Levy by R5 billion (22,3%)
Where the business has come from
2014/15 2013/14 2012/13 2011/12
Fuel levy R104c/l R0,96c/l R0,88c/l R0,80c/l
Total Net Revenue R22.2bn R20.5bn R18.1bn R17.1bn
Open and Unpaid Claims 217, 710 232 285 279 212 264 579
Settled Claims 284 079 240 783 162 130 170 043
Claims expenditure R21.4bn R22.2bn R15.2bn R12.2bn
Compensation pay-outs
- General damages
- Income support
- Medical costs
R21.4bn (78%)
R5,9bn
R9,5bn
R1.3bn
R17.5bn (78%)
R5.9bn
R10.4bn
R1.2bn
R11.3bn (74%)
R4bn
R6.2bn
R1.1bn
R9bn (73%)
R3.9bn
R4.3bn
R800m
Legal Costs as a % of total
Claims Expenditure
- RAF Legal Costs
- Claimant Legal Costs
19.5%
R1,8bn
R2,8bn
21%
R1,9bn
R2,7bn
27%
R1,5bn
R2,1bn
29%
R1,6bn
R2,2bn
National footprint - HSCs 96 83 76 52
Direct Claims as a % of total
Personal Claims30% 27% 23% 15%
Business indicators
Contextualising Accident Compensation
• RAF Fuel levy is large but insufficient to address the statutory obligations
• Compensation is “fault-based” and fault must be proven or excluded
• Many continue to be excluded, especially those who had no income to lose
• Micro-economy of intermediaries is sustained by the RAF
• Half of all matters on the Court roll are allegedly related to road accidents
• Claimants are often not the primary beneficiary and compensation is not always used for
rehabilitation
WHY RABS?
Key challenges facing the RAF
12
Inequity and barriers to access
Claims Expenditure
• High third party costs which have no incentive for efficiency
• Lump sum payments do not enable optimal cash flow management
• Claimants who are and who are not assisted rely on other social-security benefits
• Increasing deficit provision for claims incurred
• Claims expenditure tracks what could be earned, not only what was earned
• Claim payments exceed income as a result of productivity improvements
• Proving fault excludes many
• Apportionment of fault determines the extent of compensation
• Undertakings to cater to medical expenses require co-payments
UnaffordableFinancial Sustainability
• Funding not associated with claim frequencies and costs
• Beneficiary base not constituted by past, present or future contributors
• Benefits are not predetermined or defined.
• Social security assistance covers all three pillars : protecting income, providing support or funding healthcare
RATIONALE FOR CHANGE
Bill Development
RABS BILL TIMELINE (1)• The Road Accident Fund Commission is appointed.
Jun. 1999
• The commission delivered its report and recommendations for a more reasonable, equitable , affordable and sustainable scheme including a move to a no-fault scheme .
Feb. 2002
• Strategy for the Restructuring of the Road Accident Fund published. Sep. 2006
• The DoT published the “Draft Policy on the Restructuring of the Road Accident Fund. Following consideration of the comments policy was revised and approved by Cabinet in September 2011.
Feb. 2010
• The Minister of Transport published the approved policy for the Road Accident Benefit Scheme (RABS)
Nov. 2011
• The RABS Bill is first published for public comment.Feb. 2013
• The revised RABS Bill is published for comment .
• The DoT together with the RAF completes a programme of public consultations.
May – Oct 2014
RABS BILL TIMELINE(2)
•Consideration of comments received
•Research into Funding Model
•Ministerial Approval
•Preliminary Certification by the Office of the State Law Advisor
•NEDLAC consultations September –December 2015
From Nov 2014 to December 2015
• Final Nedlac Report to the MoT
• Final Certification by the Office of the State Law Advisor
• Presentation to the DG Cluster
• Cabinet approval of draft legislation
• Parliamentary legislative process to follow
• Planning and preparation for implementing RABS by RAF
January 2016 – onwards
RABS OVERVIEW
Road Accident Benefit Scheme Bill (RABS)
RABS is a new scheme that will operate on social security principles, as opposed to
insurance principles
The scheme is designed to provide reasonable, equitable, affordable and sustainable
benefits
No-fault’, fixed benefit scheme will ensure smooth alignment with the Comprehensive
Social Security System (“CSSS”) envisaged by Government
•Benefits will be provided on a no-fault basis – expanding access
•Benefits will be pre-determined, recognizing need, as opposed to loss
•Benefits will be paid in a structured manner, on a temporary and longer term basis
•General damages are excluded
•Rehabilitation as close as possible to pre-crash state is primary
•Simplified claims procedures
•Expeditious dispute resolution/alleviating the burden on the Courts
Nature of
SchemeNO FAULT BASED
Summary of the Road Accident Benefit Scheme Bill
Mandate
To provide for a social security scheme for the victims of road accident, to establish the Road Accident
Benefit Scheme, to administer and implement the scheme, to provide a set of defined benefits on a no-fault
basis to persons for bodily injury or death caused by or arising from road accidents, and to exclude liability of
certain persons otherwise liable for damages in terms of the common law, and to provide for matters
connected therewith
Benefits Health Care Services Income Support Funeral Benefit Family Support
As Is(RAF)
Target(RABSA)
Decre
ase claims b
acklog an
d R
AF’s Liab
ility
Rem
ove th
e curren
t op
eration
al challe
nges
KEY STRATEGIC THEMES
The key strategic shift from RAF to RABS
1919
Comprehensive social security systemReactive insurance system based on
common law
No Fault based (it is irrelevant how the accident occurred)
Fault based (Scheme indemnifies the wrongdoer)
Supportive natureAdversarial nature
Defined benefits ((strive to rehabilitate and re-integrate victims into society)
Subjectivity (Compensation that the claimant receives is based on prediction of the future)
Seamless administration processHighly administrative ( i.e. merits determination, apportionment e.t.c)
No cover for non-pecuniary lossCover for non-pecuniary loss
Structured monthly paymentsLump sum payment
Power to review and suspend benefitsNo power to review and suspend benefits
Internal appeals bodies to decide appeals lodged by unsatisfied beneficiaries
Claimants can use the courts to determine the claim
Silo based systems Integrated Claims Management System
CONCLUSION
Conclusion
•Great effort is and will be placed on:
− Fulfilling the Fund ‘s legislative mandate * Consoling Arm of Government *
− Fulfilling the Fund ‘s strategic objectives
− Providing efficient support to the victims of road accidents
− Preventing the catastrophic socio-economic effects of accidents in our society
•Despite this, too many crash victims are not supported, the distribution of support is
not equitable and the dispensation is unsustainable
•RABS is the proposed new social benefit scheme that will replace the RAF and the
existing fault-based compensation system
•The policy change has been investigated for over a decade, Cabinet approved the
policy approach, international research supports the changes and a Bill has been
published for public comments in 2013 and 2014 .
•The RAF supports the change….
Thank You