Road Accident Fund loses around R3 billion annually in opportunistic loss of income claims
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.
Research by actuary and damages expert Gregory Whittaker for the Actuarial Society of South Africa (ASSA) shows that by local and international standards, loss of income compensation from the RAF for non-serious injuries is excessive.
Included in Whittaker’s research are claims statistics for the financial year ended 31 March 2021, released by the RAF in terms of the Promotion of Access to Information Act.
The statistics show that loss of income settlements for the period totalled R18.4 billion, 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 says in the absence of exact figures, assuming that 14% of total loss of income claims was paid for non-serious injuries, this equates to R3 billion.
One of the key changes introduced by the Road Accident Fund Amendment (RAFA) Act of 2005, which came into full effect on 1 August 2008, was to no longer allow compensation for non-pecuniary loss (general damages not quantifiable in monetary terms, such as pain and suffering) for non-serious injuries. Whittaker points out, however, that the same exclusion was not applied to loss of income claims from individuals who suffered minor injuries in a car accident.
According to Whittaker, this has led to widespread abuse of the system, costing taxpayers billions of Rand every year. Compounding the problem, he says, is a new trend where pre-Amendment Act claims for minor injuries have now turned into claims involving future loss of earnings related to minor to moderate head injuries.
He reports that there has been a significant increase in the number of loss of income settlements made by the RAF over the years. “In the financial year ending 31 March 2008, the RAF made 5 957 individual claims payments in respect of loss of income, whereas in the financial year ending 31 March 2023, the RAF made 20 957 individual claims payments in respect of loss of income.”
Closing the gap for opportunistic claims
Whittaker recommends amending the RAFA Act to do away with the provision that allows individuals with minor injuries to submit loss of income claims.
“A simple amendment of removing compensation for non-serious injury and hence aligning this to the treatment of compensation for non-pecuniary losses would result in a saving to the fiscus of some R 3 billion a year in compensation payments,” says Whittaker.
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 expert witness costs.
Whittaker further recommends that legislators address the “substantial mismatch” between compensation provided in terms of the Compensation for Occupational Injuries and Diseases Act (COIDA) and the RAF. He points out that in the financial year ending 31 March 2021, 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 non-serious injury claim with a whole person impairment of 30%.
He recommends the establishment of a central government 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.
According to Whittaker, these steps would help address the worsening financial situation of the RAF. 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.
Road Accident Fund accumulated deficit from 1994 to 2022
Whittaker says that 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, there are a number of interventions that can significantly reduce the burden on the RAF.
Whittaker hopes, therefore, that his research will contribute towards achieving a more equitable system of compensation for victims of road accidents, whereby more resources can be allocated to those who are seriously injured.
Titled “Road Accident Fund Loss of Income Claims for Non-serious Injury: A Local and International Comparison”, Whittaker’s research also looks at the following:
- The conduct and role of key experts involved in the determination of loss of income compensation.
- A comparison of loss of income compensation available for non-serious injuries between the RAF and the Compensation Fund (CF) in terms of the Compensation for Occupational Injuries and Diseases Act (COIDA).
- Loss of income benefits available for non-serious injuries in Brazil, Russia, India and China.
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