Why the RAF is in shambolic state
With the Road Accident Fund hopelessly insolvent – its liabilities exceeded its assets by more than R206bn at the end of March 2018 – the debate is taken up in a lengthy article on the Moneyweb site. Noting that several government departments are pushing to replace the current RAF system with what they see to be a more affordable system under the new Road Accident Benefit Scheme (RABS) Bill, the article delves into the by now well-known pros and cons regarding the Bill.
However, it also quotes Gregory Whittaker, principal actuary at Algorithm Consultants & Actuaries, a consultancy firm that specialises in the quantification of damages in personal injury and accident cases. He says there are several reasons why the RAF is in a critical state.
‘Claims for loss of income now form the largest category of claims against the RAF because attorneys aggressively pursue (these) claims for even the most minor of injuries, resulting in significant fees to call experts to justify these claims. Claims are poorly defended by the RAF, resulting in over-inflated claims,’ Whittaker is quoted as saying.
Asked whether SA can afford an insurance system that covers 100% of victims’ losses, Whittaker said: ‘The problem is that the RAF is not compensating for actual loss, but for hypothetical loss and a large volume of claims are settled on a so-called ‘differential contingency’ basis. This is merely speculation and results in inflated claims values’.
According to the Moneyweb article, he says the funding mechanism of the RAF is completely wrong. At the moment the poor subsidise the rich in that a poor cleaner who travels far to work contributes more to the RAF than a rich lawyer who travels less than 100km per week (via the fuel tax subsidy).
However, the benefits are income-based and the lawyer would receive substantially more compensation than the cleaner for the same injuries. An income tax surcharge instead of a fuel levy will align benefits to contributions, says Whittaker.
‘Look at the UIF and Workmen’s Compensation schemes, where contributions and benefits are earnings-based. The RAF is the odd one out – contributions are not earnings-related, but benefits are.’
Article disclaimer: While we have made every effort to ensure the accuracy of this article, it is not intended to provide final legal advice as facts and situations will differ from case to case, and therefore specific legal advice should be sought with a lawyer.
