Road Accident Fund Financials.

Road Accident Fund

THE fiscal situation of The RAF

The body that pays damages to road accident victims deteriorated further in the year to the end of March, with its estimated net deficit plunging to R46,4bn from the prior year’s R29,9bn. The deficit includes the estimated quantity needed to settle outstanding claims.


The RAF annual report tabled in Parliament on Wednesday noted that the amount of new claims lodged dropped to 172, 859 from 222, 634 and that the backlog of outstanding claims rose to 253, 111 from 244, 652.


The fund incurred a loss of R16, 5bn during the year, a dramatic increase from the loss of R1, 5bn because of the considerably higher provision for outstanding claims.


As may be the situation each year, the auditor-general has warned that “significant uncertainty” exists about the RAF‘s capability to function as a going concern.


The fund’s precarious financial position is mainly due to what it calls the present “unjust, inequitable and unsustainable” faultbased model that demands that it establish the fault of an injury. People who cause accidents are excluded from damages.


The government has dedicated itself to proceed to a nofault, compulsory social insurance scheme in future as a way to place the RAF on a sound financial basis.


The annual report credited the sudden growth within the net deficit of the fund — which received R17bn last year from cash raised via the fuel levy — to the growth within the anticipated price of meeting outstanding claims. Also, because it’s been underfunded for several of years, it’s been not able to pay claims at the rate they are received by it.


The report said the recalculation by the RAF of its own estimated outstanding liability on the foundation of its own genuine claims expertise, the resolution of claims at amounts higher than previously estimated, and obligations arising prior to the launch of legislative changes in 2008 all led to the “signficant” growth in the estimations.


RAF CEO Eugene Watson described that the amount of private claims lodged had dropped appreciably after changes to the law that excluded a variety of claims for non-serious injuries.


The annual report also noticed that the RAF’s legal costs totalled R1,2bn and claimants’ legal costs R2,3bn. Cost on claims amounted to R12,5bn, with the typical resolution per claim growing 17% to R54,808 (R46,995). More than R3, 9bn was paid for only R800m for medical costs, 3bn for loss of profits and support, and compensatory damages, more than R4.


Mr Watson criticised the substantial quantities that lawyers received for their work for injury fees.


“Success fees (contingency fees) paid to lawyers were estimated to be in the area of R4,5bn, exacerbating the circumstances of adversity sufferers of accidents suffer,” he said. “In addition, the typical time taken to settle a claim still ranged between 12 to 60 months for non-hospitalised claims, chiefly on account of the requirement to demonstrate fault as well as the subjectivity in determining loss of income and support benefits.

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