Report to the Parliamentary Portfolio Committee on Transport

 

By the

Chief Executive Officer of the Road Accident Fund

Mr Humphrey L. Kgomongwe

 

on

 

The Road Accident Fund

Amendment Bill, 2003

14 October 2003

 

INDEX

Item

Topic

Page

1

Purpose of Bill

3

2

Key issues informing the Bill

3

2.1

Channelling of damages to accident victims

4

2.2

Financial position of the RAF

4

2.3

Aim to optimise resources

8

2.4

Sound corporate governance

8

2.5

Financial impact of Bill on RAF

8

3

Background to the Bill

9

4

The Consultative process

10

5

Overview of the Bill

11

6

The Amendments

11

6.1

Payment of future medical expenses

11

6.2

Payment of future loss of earnings and support

12

6.3

Payment of general damages

14

6.4

Introduction of a medical tariff

15

6.5

Deduction of benefits received from collateral sources

16

6.6

Limiting the claims value on claims of non-residents

17

6.7

Regulation of liability for emotional shock

18

6.8

Dispute resolution through mediation and arbitration

19

7

Operational considerations

23

8

Submission regarding commencement date

23

9

Summary of matters to be addressed in Bill

23

10

Conclusion

23

 

1. Purpose of Bill

The Road Accident Fund (RAF) exists to compensate persons who have suffered loss or damage wrongfully caused by motor vehicle accidents in South Africa. The Fund’s ultimate vision is to provide relief for all South African residents who suffer damage or loss due to bodily injury or death caused by traffic accidents.

In line with the strategic purpose of the RAF, the Bill is viewed as necessary for the sustainability of the organisation and the system of compensation. The Bill is expected to have a positive impact on the RAF’s cash-flow position by largely doing away with up-front payment of predetermined lump sums for loss or damage still to be suffered in future.

A further key purpose of the Bill is to protect claimants. Measures to address sustainability will ensure that the Fund and the system of compensation exist into the future to meet the claims of injured victims. The increased introduction of payment by instalments is likely to provide claimants with some protection against dissipation of their compensation money. Therefore a key theme is to replace income, support and other damages suffered when the actual loss takes place with instalment payments. Thereby the claimant will have access to an income stream and financial resources when the need arises in the future.

Where it is deemed necessary, the Bill introduces some limits on the RAF’s exposure to liability risks, and this is expected to result in savings on claims expenditure. Since public resources are scarce and have to be optimised, such limitations are regarded as reasonable and equitable in the overall context of the road accident compensation system.

The provisions of the Bill are considered to be broadly reconcilable in their effect to some of the most important recommendations of Road Accident Fund Commission.

 

2. Key issues informing the Bill

There are essentially four issues informing the Bill:

 

2.1 Channelling of damages to accident victims

Road accident compensation was designed to place the claimant in the same financial position he/she would have been had the accident not occurred. This requires that the Fund pays damages for losses suffered from date of accident to date of claim settlement ("past losses"), and damages for losses still to be suffered after claim settlement ("future losses"). Currently once-off lump sum payments include the reasonable expected losses still to be suffered in future and damages are paid even before theses losses actually realise. However, such losses may never realise. Principles of sound public finance management demand that it is more reasonable and equitable to replace income or support when it is actually lost.

The report of the Road Accident Fund Commission contains two noteworthy quotations on the disadvantages of lump sum payments:

" A successful claim is not a reward, it is not some form of prize, it is to assist in coping with the unknown future…we are in favour of monthly payment because people do see the lump sum payment as a reward, they want to spend the money in whichever way they like. Some cannot manage their money well, there is a cost in the management of money, people do not always realise how long term are their needs…."— Ms Amore Malan, Quadriplegic Association of South Africa" (Volume 1, page 594)

 

"Resources are depleted within years of the reward and the later, more problematic years of the victim’s life are left unresourced.—The South African Federal Council on Disability (Volume 1, page 594)

 

2.2 Financial position of the RAF

The summary of the RAF’s historical financial position in Table 2.1 shows that the financial condition of the Fund has deteriorated over the past four years. While fuel levy income increased by 14% over 4 years, claims expenditure increased by 41%. The financial statements reflect a growing deficit for outstanding claims as the RAF does not have sufficient assets to cover its actuarial liability for claims already incurred. By the end of the 2002 financial year the deficit had grown to R 16,660 billion.

Table 2.1 Overview of the RAF’s financial position

Financial year end 30 April/ 31 March 2002

1999

2000

2001

2002

Income from:

-fuel levy

2 183

2 151

2 165

2 483

-investments

102

234

224

169

Cash expenditure to:

-claims paid

1 802

2 130

2 495

2 541

-reinsurance

4

5

6

-administration and operating costs

125

160

170

237

-road safety

55

50

50

-

Net cash flow

303

41

(331)

(132)

Depreciation

5

9

11

11

Increase in provision for diesel rebate

42

Increase in provision for outstanding claims

1 069

1 357

2 512

3 140

Operating loss

771

1 325

2 854

3 325

Deficit beginning of year

8 385

9 156

10 481

13 335

Deficit end of year

9 156

10 481

13 335

16 660

Provision for outstanding claims

11 083

12 440

14 952

18 092

Less net resources

1 927

1 959

1 617

1 432

Deficit at end of year

9 156

10 481

13 335

16 660

 

The RAF is funded by an appropriation of the general tax levied on fuel, but there is no correlation between the tax levied to pay compensation, the overall risk exposure and the ultimate compensation determined by law. The long-term deficit between income and expenditure results in cash flow problems, asset depletion and a growing liability for outstanding claims.

Graph 2.1a below shows the widening gap between fuel levy income and expenditure. This graph shows why it was necessary to draw down long-term reserves in order to continue with claims settlement and payment. Given the present rate of draw-downs on reserves to pay claims, it is expected that the Fund’s reserves will be depleted by January 2004.

 

 

Note:

The fuel levy income and expenditure for 2003 are provisional figures

 

 

The pie chart in Graph 2.1b shows the RAF’s expenditure on claims compensation (excluding medical costs) for the financial years 2002 to 2003. An analysis of payments for loss of earnings and support shows that as at date of payment, losses had not been incurred for 37% of compensation paid. Payments towards general damages represent 52% of claims compensation. Lump sum payments are presently made for general damages and include a component of future losses still to be realised. Therefore, as at date of payment, almost 40% or more of claims compensation is paid in advance in the reasonable expectation of future losses still to be suffered. However, these losses may never be realised.

Such lump sum payments are not sustainable and drain valuable public resources before future losses are actually realised.

 

 

 

 

Graph 2.1c displays the RAF’s total expenditure by major category over three financial periods.

 

These realities compel the Fund to re-look at areas of risk exposure and introduce responsible cash management practices, while simultaneously protecting the interests of claimants.

 

2.3 Aim to optimise resources

In an effort to optimise scarce public resources, it is prudent to pay damages as and when the loss is suffered, rather than up-front in lump sums.

 

2.4 Sound corporate governance

Considerations of sound corporate governance demand that the interests of claimants requiring compensation over the short and long term are aligned with the interests of government, the funder of the RAF, and the road using public who pay fuel tax (the source of the Fund’s income). Arguably, sound corporate governance presupposes efforts to secure the Fund’s sustainability.

 

2.5 Financial impact of the Bill on the RAF

The amendments are expected to have a significant impact on the future cash flow management of the RAF. The Fund conducted an informed projection of the financial impact when payments towards future losses are paid in instalments, rather than in lump sums, as is presently the case. Payment data over the financial periods 1999 to 2003 was analysed in respect of general damages, future loss of earnings and support. This served as a basis to project the expenditure on these items for the current 2003/4 financial year.

The following assumptions were made for the projections in 2004/5 through to 2006/7:

The projected results are depicted in Graph 2.5 below. Initially, a considerable improvement in cash flow of up to 70% in respect of the above items should be achieved. However, this improvement will reduce to a level of about 40% in respect of the said items over a period of 15 years.

Any cash flow surplus will be invested to enable the Fund to meet its liability in respect of periodic instalment payments.

 

3. Background to the Bill

The preparation and presentation of the Bill was informed by the above key considerations. The time line in the table below summarises the history of the Bill:

Mid 2001

Previous RAF Board initiated a process of proposed legislative changes

End 2001

Bill released for public comment

During 2002

Consultative process with key stakeholders and role-players in the MVA compensation environment

July 2002

Draft Bill submitted to the Minister of Transport

During 2002-3

Verbal and written responses considered from 80 persons and organisations

Mid 2002 to early 2003

Minister of Transport awaits the recommendations of the Road Accident Fund Commission chaired by the Hon Ms Justice Satchwell

Jan 2003

Report of Satchwell Commission is released

Early 2003

Government convenes an Interdepartmental Committee to consider the implications of the RAF Commission report and make recommendations to Cabinet; The RAF participated in this Committee

Mid 2003

Interdepartmental Committee makes recommendations to Cabinet. Draft Road Accident Fund Amendment Bill, 2003 forms part of those recommendations

Oct 2003

Draft Amendment Bill is presented to the Parliamentary Portfolio Committee on Transport

 

 

4. The Consultative process on the Bill

The previous Board of the RAF and management engaged in an extensive consultative process with many role-players in the MVA compensation environment. The Bill was released for public comment and the verbal and written inputs were received from a large number of respondents with wide-ranging interests and perspectives.

The scope of the consultative process is summarised below:

5. Overview of the Bill

The Bill aims to channel compensation to the intended beneficiary (the claimant) as and when loss is suffered, to reduce the Fund’s risk of exposure and to improve cash flow. The Bill addresses six areas:

    1. Presently the Fund may exercise a discretion to furnish undertakings to pay certain future benefits. The Bill seeks to make it obligatory for the Fund to pay future damages in instalments.
    2. The RAF’s liability with regard to medical expenses is to be determined in accordance with a set prescribed tariff.
    3. The Bill seeks to authorise the Fund to deduct from its liability all benefits from other sources received by the claimant ("collateral benefits") as the result of personal injury or death of a breadwinner.
    4. The Bill limits the RAF’s liability to compensate non-residents of South Africa to an amount to be regulated by the Minister.
    5. The RAF will not be liable where the claimant alleges to have been emotionally shocked merely as a result of having witnessed or observed or having been informed of the injury or death of another person in a road accident.
    6. The Bill seeks to establish a process of mediation and arbitration as a pre-requisite to litigation in courts.

 

6. The Amendments

Each of the amendments is discussed in the context of the present situation, the amendment itself, and the benefits to be achieved from each amendment. Where relevant, other considerations are highlighted.

6.1 Payment of future medical expenses (Clause 1 of Bill, re sec. 17(4)(a) of Act)

Present position

Presently the Fund may elect to pay future medical expenses in a cash lump sum or to furnish an Undertaking to pay future accident-related medical expenses as and when incurred in the future. In so doing, it exercises a discretion. Claimants may challenge the Fund’s decision on administrative grounds.

The Amendment Bill

The Bill creates a mandatory obligation to pay future medical expenses to be incurred by the claimant in instalments in terms of an Undertaking to be furnished by the Fund. This provision will apply to unfinalised claims at the date of commencement of the amendment.

Benefits

This provision offers significant protection and security to accident victims. It will eliminate the risk of under-compensation of the claimant when lump sums are calculated. Rather, the claimant will be compensated for the reasonable actual costs incurred for future medical services. The amendment ensures that the claimant will have life-long access to adequate medical care for accident-related injuries. The Bill removes the risk of early depletion of compensation paid as a once-off lump sum. In essence, money is accessible when required to meet medical needs.

 

6.2 Payment of future loss of earnings and support (Clause 1 of Bill, re sec. 17(4)(b) of Act)

Present position

Presently the RAF has the right to elect to offer the claimant an Undertaking to pay future losses of income and support in instalments. Practically this right is rendered meaningless as claimants are entitled to refuse to accept such an Undertaking. Effectively the Fund is obliged to pay compensation for loss of earnings and support in advance and before the loss is actually incurred. Therefore lump sum payments for future losses of earnings and support have become the norm under the present Act. The Amendment Bill changes this position.

The Road Accident Fund Commission called for research on how claimants appropriated lump sum payments for damages. The Commission found that "claimants are largely ignorant of what the lump sum payments have been allocated for" (Volume 3, page 441). Lump sums were utilised for various purposes, ranging from payment for a house or bond, motor vehicles, furniture and appliances, medical expenses and monthly expenses (Volume 3, page 440). This research reveals the real risk of abuse of social security benefits paid by the Fund as compensation, and therefore, public money is not always appropriated for the purpose intended.

The report of the Road Accident Commission states:

"Abuse, in the context of a social security system funded by the taxpayer, is not limited to acts of dishonesty, misconduct or mismanagement. There is concern that public funds are expended in a manner that does not enhance or support the principles upon which a system of social security is or should be based." (Volume 1, page 309)

 

 

The Amendment Bill

The Bill creates a mandatory obligation to pay claimants’ future losses of earnings or support in instalments in terms of an Undertaking to be furnished by the Fund. Compensation for loss of earnings or support in the future will be paid in instalments in arrear, upon proof of life. Amounts, intervals and other parameters for instalments will be regulated and negotiated with claimants or determined through dispute resolution mechanisms. This provision will apply to unfinalised claims at the date of commencement of the amendment.

 

Benefits

This provision in the Bill offers significant protection for claimants from risks such as dissipation, mismanagement and abuse of lump sum payments. Early and untimely depletion of lump sum compensation will render the claimant without adequate resources to meet future needs of daily living. Claimants will receive future streams of income or support when these would have become due in any event. Thus claimants are protected against untimely depletion of compensation paid in advance.

This provision reflects reality before the accident: people receive salaries and income monthly in arrears, and not life-time in advance.

Another benefit will be to channel compensation to the intended beneficiaries who will be able to use it for its intended purpose. The provision is expected to have an immediate positive impact on the RAF’s strained cash flow.

 

 

Other considerations

The amendment will impact on current operations as more payments will be made more often. Capacity of existing systems will have to increase to manage the higher number of payments. The introduction of systems-driven payment solutions will enhance service delivery and streamline on-going claims management. Therefore initial increases in structural costs will be necessary.

 

 

6.3 Payment of General Damages (Clause 1 of Bill, re sec. 17(4)(c) of Act)

Present position

General damages are monetary compensation for non-economic loss such as pain, suffering, disfigurement and loss of amenities of life. Payments for general damages represent the largest item of claims expenditure for the Fund, or some 31% of total annual claims expenditure as illustrated in Graph 2.1c.

General damages are currently paid in single lump-sums, even though claimants may experience ongoing pain, disfigurement and loss of amenities of life well into the future.

The Amendment Bill

The Bill provides for the mandatory payment of general damages in the form of an Undertaking to pay the damages in instalments. Regulations will prescribe the manner and process of payment. The Fund proposes that payment for general damages be prescribed as follows:

The payment intervals and instalments, details as well as threshold percentage will be prescribed by regulation. The provision will apply to all unfinalised claims at date of commencement of the amendment.

 

 

 

Benefits

Claimants will have access to resources into the future beyond the date of claims settlement. Since the amendment will apply to all unfinalised claims, an immediate positive effect on cash-flow is foreseen. The significance of the impact on cash flow will largely depend on the level of the threshold percentage.

6.4 Introduction of a medical tariff (Clause 2 of Bill, re sec. 17A of Act)

Present position

The Fund’s liability for medical expenses is neither fixed nor determined by a prescribed and binding tariff. This leaves public funds exposed to open-ended and uncontrolled risks since the RAF is obliged to pay what hospitals or doctors charge for accident-related treatment. Viewed from the perspective of a public health care funder and given the considerable financial pressures on the Fund, private patient rates are neither affordable nor sustainable. Over many years medical inflation presented at higher than CPI rates and this further exposed the RAF to spiraling medical costs.

The Amendment Bill

In terms of the Bill the Fund’s liability to pay medical expenses will be set by a prescribed tariff. The tariff will apply to the public and private health care sectors. The provisions will not apply to medical costs incurred prior to the commencement date of the amendment.

Prior to the introduction of such a tariff, the RAF will consult extensively with the medical profession and regulatory bodies in the medical industry.

Benefits

A prescribed tariff will enable the Fund to provide adequate and reasonable health care, and exclude liability for luxurious, frivolous, experimental and unreasonable treatment. Adequate provision should be made for rehabilitation to return claimants to active economic life as soon as possible, and to improve the quality of life of the severely injured. A fixed tariff will create certainty for claimants and medical service providers.

The introduction of a set tariff will enable the RAF to fund a broader and more appropriate spectrum of medical service providers.

 

    1. Deduction of benefits received from collateral sources (Clause 2 of Bill, re sec. 17B of Act)

Present position

In cases of accidental death or injury, financial benefits from other sources often accrue to claimants. Such benefits from other sources are referred to as collateral benefits. When claimants are also entitled to claim from the RAF, they receive double or even triple compensation in respect of the same injury or death. Presently only certain collateral benefits are deductible from the Fund’s liability to pay. As a general rule, benefits received in terms of a contract of employment and an award by the Compensation Commissioner for an injury on duty may be deducted from the compensation payable by the RAF. Benefits received as the result of the death of a breadwinner are not deductible.

Double or triple compensation from state resources is quite common: A person on duty who is seriously injured in an accident may claim from

In addition the claimant may still be entitled to disability benefits offered by the employer and receive benefits from private disability policies and provident funds.

The Amendment Bill

All benefits from a source other than the RAF accruing to a claimant as a result of injury or death in a road accident will be deductible from compensation payable by the RAF. The provision will apply to both injury and death claims and so address inconsistencies in the present legal position. Collateral benefits include insurance, pension and gratuitous benefits. However, if the claimant proves that benefits received are legally reimbursable to the collateral source after the RAF pays compensation, the benefits received from that collateral source will not be deductible from the RAF’s liability.

The provision will only apply to claims that arise from incidents after the date of commencement of the amendment.

 

Benefits

The amendment will prevent double compensation for the same injury or loss. This will represent responsible management of public funds. The new dispensation will also eliminate present legal and practical inconsistencies: there will be no distinction between death and injury claims. This therefore introduces fairness.

Other considerations

Since some successful claimants may have used their own resources to take out private insurance, it may be fair to reimburse claimants for premiums already paid. However this consideration is not contained in the Bill and could be addressed through regulation. It may be prudent to provide that the categories of collateral benefits which are to be deducted, be prescribed by regulation. A further consideration is to provide for mandatory disclosure by payers and recipients of amounts of collateral benefits.

 

 

    1. Limiting the claim value on claims of non-residents (Clause 3 of Bill, re sec. 18(5) of Act)
    2. Present position

      Non-residents of the Republic who are injured in road accidents in South Africa currently enjoy the same unlimited cover from the RAF as local residents. Some claims by non-residents are extremely large because they are quantified in foreign currencies and are inflated by the higher cost of living in other countries. Once foreign claims are paid, public money is taken out of the country and these resources are lost to the South African economy. The current dispensation of open-ended liability is in contrast to prevailing international practice where most foreign jurisdictions require non-residents and foreign visitors to take out private insurance for accidental injury or death.

      The Amendment Bill

      Claims for injury or death of non-residents will be limited to an amount to be prescribed in regulations by the Minister, on recommendation by the RAF’s Board. The amendment defines a non-resident as: "a person who is not permanently resident in the Republic at the time of the occurrence which caused the injury or death concerned".

      The amendment will apply to claims arising after the date of commencement.

       

      Benefits

      The amendment will enable government to optimise limited resources for the benefit of South African residents. Savings in claims expenditure will be achieved by limiting the Fund’s liability to compensate claims of non-residents. This will impact favourably on our reinsurance position as reinsurers either steer away from this real open-ended liability or charge unaffordable premiums. By limiting claims of non-residents, government will also align the country with international best practice.

       

      Other considerations

      It is recommended that a comprehensive communications campaign be conducted to inform non-residents and foreign visitors of the need to take out private insurance against risk that damages or losses due of injury or death may exceed the prescribed limit. The RAF proposes that the Minister of Transport should liaise with the Minister of Environmental Affairs and Tourism to initiate such a communications campaign. The Fund also intends to liaise with the short and long term insurance industry to develop top-up insurance products for non-residents and to encourage insurance companies to market such new products prior to the commencement of the amendment.

       

       

    3. Regulation of liability for emotional shock (Clause 4 of Bill, re sec. 19(g) of Act)

Present position

A person may sustain emotional shock when

Such a secondary victim suffers no physical injury, is not involved in the collision, need not be present at accident scene, and need not be related to primary victim.

Such claims are inherently problematical and susceptible to fraud and malingering. The real risk is for unlimited exposure in that the RAF is faced with multiple claims from persons who were not even involved in the accident. Many unforeseen and unknown claimants may claim for compensation. This is unreasonable, unsustainable and unjustifiable on public policy considerations.

As a matter of illustration, should a student sustain serious injuries or be killed in a car accident, the RAF may be liable to compensate the following additional persons for emotional shock: both parents, all four grandparents, all the brothers and sisters of the student, a fiancé or longstanding partner in a loving relationship.

When such claims for emotional shock from secondary victims are entertained, valuable resources are consumed that should have been allocated to the person who sustained bodily injuries in the collision.

The Amendment Bill

The Bill provides that emotional shock suffered by secondary victim will not be a basis for claiming compensation from the RAF. The amendment will apply to claims arising from incidents on or after the commencement date.

Benefits

The key objectives with this amendment are to prioritise on the appropriation of public resources and to contain liability. This will improve cash flow and eliminate an exposure to liability that was ever intended when the present compensation system was designed. The amendment will improve the reinsurance position of the RAF.

 

 

    1. Dispute resolution through mediation and arbitration (Clause 5 of Bill, re sec. 24(6) of Act)

Present position

Under the current system, if the RAF and a claimant are unable to achieve a meeting of minds and settle a claim, the only recourse is for the matter to be adjudicated on in a court of law. In Chapter 24 on Page 725 at paragraphs 24.82 and 24.85 of the Report of the Road Accident Fund Commission 2002, it is stated:

"Litigation is extremely adversarial. From the outset there is no expectation of openness or cooperation between the parties. The Rules of Discovery of documentation and of experts’ opinions do not support pre-litigation resolution.

All interested parties would agree with Advocate J Mullins (S.C.), who believes that "the aim must be for a system which encourages a constructive and participative approach rather than a destructive and adversarial one that protracts and renders it more expensive"

 

Litigation is complex, time consuming and costly. The duration of the litigation process is governed by many undeterminable factors outside the control of the litigating parties, such as the congestion of court rolls, the availability of presiding officers and translators.

The Amendment Bill

The Bill prescribes a mediation-arbitration procedure as a precursor to the litigation process being commenced through the issuing of a summons. Drafts of the Rules for Mediation and the Rules for the Arbitration of disputes have been prepared for the purpose of regulating mediation-arbitration in a refined resolution model. It is intended that a consultative process with the legal profession and other interested parties will be followed, where after the Rules will be finalized. The draft Rules have been designed to ensure a quick resolution of the dispute between the RAF and the claimant. This will ensure that claimants receive quicker payment of compensation. It is intended that the Rules be subject to regular review and change so as to adapt to the needs or concerns of the parties.

The amendment will apply to all claims-in-process as at commencement date unless court proceedings have already been instituted.

Benefits of mediation

The purpose of mediation is to ensure that at an early stage the parties attend a meeting chaired by a trained mediator who will facilitate the determination of the issues in dispute and seek a resolution of the issues. Mediators will be required to complete a training course and although employed by the RAF, will operate independently from officials who conduct the management, investigation and assessment of claims.

Process after mediation: arbitration

If the mediation process fails to result in a settlement of all disputes, the parties sign a mediation certificate in which they record the issues which have been settled and those issues that remain unresolved. When all disputed issues are not settled at mediation, the Bill requires that the matter proceed to arbitration.

After having successfully completed an Arbitrators Training Course independently conducted by tertiary institutions in South Africa, arbitrators will be accredited by such institutions. Only accredited arbitrators will be eligible to preside and adjudicate on disputes. The standard of the various courses to accredit arbitrators will be set and monitored by a university. Arbitrators will reflect an appropriate representative balance of race and gender.

 

Benefits of arbitration

The arbitrator is actively involved in the process, determining the various dates for compliance and the hearing. Effectively the arbitrator directs parties to manage response times and compliance with the exchange of information between them. This facilitates the speedy resolution of disputes and also serves to limit costs. Within the Arbitration Pilot Project being conducted in the Western Cape, 90% of claims referred to arbitration are settled on average within 3 months of being referred to arbitration, and the remaining 10% are on average settled within 8 months of being referred to arbitration. This is compared to the present system in which the average time to settle a claim is 20 months. A previous analysis of the Arbitration Pilot Project exhibited that the quicker resolution of disputes resulted in a 35% saving in total legal costs.

The introduction of mediation and arbitration as pre-requisites to litigation will regulate a constructive and focused approach to resolving disputes sooner. It is hoped that the RAF may improve its relationship with its main stakeholders, claimants. The amendment will also reduce the workload of the courts.

 

 

 

 

 

Important consideration

  1. It is considered to be incumbent on the RAF to convey that the amendment to section 24 as set out in the Bill does not correctly reflect the intention of the RAF.
  2. It was always intended that:

    It is proposed that to reflect the true intention of the RAF, Section 24 of the principal Act be amended by the substitution for subsection (6) of the following subsection:

    "(6) No claim shall be enforceable by legal proceedings commenced by a summons served on the Fund or an agent:

    (a) before the expiry of a period of 120 days from the date on which the claim was sent or delivered by hand to the Fund or the agent as contemplated in subsection (1); and

    (b) before all requirements contemplated in section 19(f) have been complied with; and

    (c) before the third party has exhausted the prescribed procedures for the resolution of disputes though mediation and arbitration.

    Provided that if the Fund or the agent repudiates in writing liability for the

    claim before the expiry of the said period, the third party may at any time

    after such repudiation [serve summons on the Fund or the agent,

    as the case may be] refer the dispute to mediation and arbitration.

     

     

     

    1. Operational considerations

    The Fund will be required to conduct periodic payments and will therefore make more payments, more often. An increase in capital expenditure is foreseen to upgrade systems to manage more payments, effectively manage medical claims according to the tariff, and to establish links with external information sources. Operational costs will be incurred to train, re-skill and re-deploy staff.

     

     

    8 Submission regarding commencement date

    In view of these operational considerations, the Fund requests an amendment to clause 8 of the Bill, providing for Act to come into effect on date to be proclaimed by the President in the Government Gazette.

     

     

    9 Summary of matters to be addressed in Bill

    In view of the above discussions, it is recommended that the Bill should provide for:

     

    10 Conclusion

    The purpose of the Road Accident Fund Amendment Bill, 2003 is to:

    The Bill is reconcilable with several of the recommendations of the Satchwell Commission.