STEVE MURPHY: Road Accident Fund cries out for change

In 2021 the Road Accident Fund (RAF) unilaterally chose to change its reporting status, from being a national public entity reporting in accordance with schedule 3A of the Public Finance Management Act as a risk-carrying entity, to a social benefit fund.

The change allowed the RAF to account financially quite differently from in the past. Previously, its accounting had followed that of an insurer, whose functions it represents.

Despite contrary counsel of the auditor-general and Accounting Standards Board, the RAF insisted on financially reporting as a social benefit fund, which allowed it to avoid reporting its outstanding claims, a rationale obligatory requirement under its previous status. 

The RAF, which reports to the department of transport, receives its income through a levy included in the fuel price, totalling about R47bn a year. The RAF has been unprofitable for decades. It only experienced one clean audit in the five years 2019-2023, and disclosed that its accumulated deficit at end-2023 was R23.9bn. 

At end-2021 the RAF estimated its outstanding claims, which it now no longer reports, to be R330bn. Reread that figure, slowly. The total unfunded claims in the RAF’s accounts by 2021 was larger than Eskom and Transnet’s combined debt. The R330bn is the equivalent of 14% of the nation’s budget. The outstanding claims of three years ago are the equivalent of seven years of the current income the RAF receives via the fuel levy. Failing to account for R330bn of claims does not make them disappear.

The funders of the RAF’s R330bn (2021 figure) of unaccounted claims are thousands of claimants whose submissions have not been finalised. In the 2024 reporting period about 369,000 claimants awaited settlement or finalisation of their claims.

The full cost of these outstanding claims is not recorded. The individuals most in need of financial support for which the “compensating entity” has received its income (through the fuel levy) are now denied the very entitlement for which the fund was created. The non, or poor, delivery of compensation for medical treatment as well as rehabilitative care falls on those most disadvantaged to arrange or find alternative solutions. 

The RAF is soon to complete a five-year turnaround plan of its past inadequate service delivery and slow claims payments. Its media statement of September 2024 highlighted significant and commendable progress being made. However, the many injured and destitute remain the financiers of RAF’s insufficiencies. 

Do options exist for a change or transformation of such a dysfunctional situation? Is there a workable solution to the challenges plaguing RAF’s underperformance? Space does not allow for detailed explanations of the arguments but the brevity of explanation should allow some light to shine. A model of good private-public partnership (PPP) already exists in the risk business between the government-owned SA Special Risks Insurance Association (Sasria) and its agents, insurance companies.

Sasria protects clients from losses consequent upon events of a special risk nature, which are terrorism, riots, strikes, civil commotion and public disorder. It works closely with its agents, registered insurers, with these marketing and collecting Sasria’s premiums and reviewing claims on its behalf — insurers. Both parties enjoy an open and transparent relationship, which they have been diligent to establish. 

The partnership between Sasria and its insurance company agents worked well in the 2021 KwaZulu-Natal riots, after which more than 25,000 claims were facilitated with prompt and expeditious settlement. Could this relationship work for the RAF? Some considerations would include:

• A line has to be drawn under the current deficient RAF process and reporting structure. New claims entering the current black hole have little prospect of being treated properly or expeditiously.
• The RAF should be separated into NewRAF and OldRAF. OldRAF would represent the current structure and claims, ring-fenced from a date when NewRAF could be formed. OldRAF would run off past claims, using its current processes and expertise. NewRAF could be constituted as a division of Sasria or retain its own legal structure but fall under the established management and infrastructure of Sasria.
• Transfer the RAF’s reporting line from the minister of transport to the minister of finance, to which Sasria reports. Additionally, NewRAF should fall under the jurisdiction of the Financial Sector Conduct Authority.
• By incorporating or partnering NewRAF with Sasria it would benefit from the relationship and protocols of Sasria’s agents and their expertise and processes in offering a faster, professional response to claimants, with transparency of results. 

The benefits are many: 

• NewRAF under Sasria in one shape or another, retains the expertise and insights gathered over the years, and uses the extended reach and services of its agents (insurers).
• NewRAF can agree, initially or immediately, to a graduated scale of approval for their agents settling minor claims, while NewRAF owns the complex and difficult.
• Auditing and reviewing of claims would be no different from the existing PPP relationship that Sasria has already established. 
• Insurers are competent at handling claims, which would substantially improve the lot of claimants. 
• The combined offices of insurers would offer hundreds of additional contact points for claims engagement.
• The diversity of contact points and attorneys would reduce the opportunity for collusion of settlements. 
• Sasria/NewRAF could drive best practices given its access to a variety of practices by its agents.
• Most importantly, the victims of motor accidents would be dealt with more promptly. The injured would have better, faster prospects for compensation than the 369,000 outstanding claimants currently experience. 

This suggestion does not resolve the existing black hole in the RAF’s accounts, but it does mean it will not increase, and the proposal allows for a ring-fenced structure in which the current problem could be addressed. 

A reappraisal of how we respond to the injured after road accidents is imperative. SA’s record of service delivery and managing its accountability to the community of the injured is nothing of which to be proud.

It’s time for change, but some mature leader must grasp the nettle. 

• Murphy, who previously held CEO roles in SA reinsurance companies, currently holds diverse board appointments.