South Africa

South Africa’s R3 billion RAF waste

The beleaguered Road Accident Fund (RAF) could save around R3 billion a year by rejecting opportunistic loss of income claims from individuals who suffered only minor injuries in a motor vehicle accident.

This is according to research by actuary Gregory Whittaker, presented by the Actuarial Society of South Africa (ASSA). 

Whittaker’s research shows that by local and international standards, loss of income compensation from the RAF for non-serious injuries is excessive.

The latest data released by the RAF shows that loss of income settlements totalled R18.4 billion in the 2021/22 financial year, of which approximately 14% was paid to individuals with non-serious injuries. 

In the financial year ended 31 March 2023, the RAF paid R22 billion in loss of income claims. 

Whittaker explained that assuming 14% of the total loss of income claims was paid for non-serious injuries, this equates to R3 billion for the latest financial year.

One of the key changes introduced by the RAF Amendment Act of 2005 was to allow no compensation for general damages not quantifiable in monetary terms, such as pain and suffering for non-serious injuries. 

Whittaker points out that the same exclusion was not applied to loss of income claims from individuals who suffered minor injuries in a car accident.

This has led to widespread abuse of the system, costing taxpayers billions of rands every year. 

He noted that there has been a significant increase in the number of loss of income settlements made by the RAF over the years, making the problem worse. 

In the 2008 financial year, the RAF made 5,957 individual claim payments concerning loss of income. In the 2023 financial year, this shot up to 20,957 individual claim payments. 

This has contributed to the size of the RAF’s annual deficit skyrocketing as the fund continues to pay out more money than is collected by the RAF levy on fuel. 

At the end of the 1994 financial year, the deficit of the RAF stood at R3.8 billion. By the end of March 2022, the deficit had grown to R344.8 billion. This sharp growth is shown in the graph below.

Saving the RAF

While the extraordinarily high rate of road accidents in South Africa is the primary cause of the dire financial position in which the RAF finds itself, a few interventions can significantly reduce its burden. 

To prevent the RAF from losing around R3 billion a year, Whittaker recommended doing away with the provision that allows individuals with minor injuries to submit loss of income claims.

He adds that such an amendment would also reduce by around 25% the number of RAF cases in South African courts, resulting in substantial savings in legal costs.

Whittaker added that legislators address the mismatch between compensation provided in terms of the Compensation for Occupational Injuries and Diseases Act (COIDA) and the RAF. 

In the 2021 financial year, the biggest claim paid for a non-serious injury claim by the RAF was around 25 times the maximum claim paid under COIDA for a similar claim.

He also suggested that the government establish a central body responsible for determining fair compensation to individuals, whether injured in a car accident or at their place of work. 

He adds that such a central body should also be tasked with determining how the compensation regime should function.

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