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