Critical care: A local clinic is being built in Mvezo
Where the Road Accident Fund (RAF) is concerned, there are basically two types of people: those who have received benefits from one of the country’s most maligned institutions, and those who harbour ill will towards the levy included in the fuel price that funds its activities.
For RAF chief executive Dr Eugene Watson the lines are not quite as clear, given that his job is to navigate what can appear to be a road littered with the debris from a road accident. Historical underperformance that led to numerous commissions of enquiry over the years, a changing regulatory framework and a system that has been subject to greed and corruption are only some of the obstacles ready to trip him up.
He is the first to admit that one of his organisation’s biggest stumbling blocks is its dismal track record. Watson joined the RAF two years ago. In his previous position as head of the Government Employees’ Medical Scheme, he was known for pursuing excellence in operations.
“People often understate the legacy,” he says. “If you look back to 2011/12, we were a big business, not paying claims and accumulating money. [We operate in] arguably the most adversarial environment and there were strategies implemented by the management team before that to shrink the staff complement by about a third.
“The bar is set high and there are great expectations of the institution because of the nature of our work. Are we done yet? Far from it. We are reminded every day there is still a lot to do.”
Leading the RAF is unquestionably a big challenge, but one that he relishes. He sees the upside in knowing that every day the organisation has taken one step closer to where he wants it to be.
“The RAF has come from a bad place, and it has been there for a long time. Our team is committed to it and there are nice early signs of change. But there is a lot to do and we need people to support the fact that we are, in many ways, doing the impossible because others couldn’t do this,” he says.
The magnitude of the challenge can be measured in the estimated 1% of the population that interacts with the organisation at any given time — either through submitting claims, waiting to be paid, or currently receiving payments.
Amid these daily challenges, Watson and his team are preparing for significant changes to the RAF’s operating model. The proposed Road Accident Benefit Scheme (Rabs) will radically change what the RAF does, how it does it, and how road accident victims will be compensated.
“With Rabs you basically see a shift from insuring wrong-doers to providing support to victims of crashes. Immediately when you drop the concept of ‘fault’, a lot more people become eligible for benefits if they are involved in a crash. And this is fairer to all the people who contribute to the pool.
“At the moment it is skewed because you must have a ‘loss’, and to have a ‘loss’ you must have started off with an income or a standard of living. If you didn’t have anything before the accident, there is no ‘loss’, so you get nothing by design,” Watson explains.
He says the changes will benefit road accident victims because compensation will be calculated according to predetermined scales for everything from medical expenses to loss of income, loss of support (in the case of dependents) and funeral benefits.
The advantage for the RAF is that this new arrangement will not only simplify and speed up claims processing, but will enable it to have more predictable expenses for the first time. Importantly, the institution’s exposure to legal challenges will all but fall away.
The current system — in which negligence or “fault” has to be proven — has created a feeding frenzy for the legal profession, who see the RAF and the claims process as easy pickings, says Watson. “Their motivation has been to claim a share of the compensation awarded to victims as their fees, which is a system that has been open to abuse and corruption, to the detriment of claimants.”
Watson says that a staggering 20% of the RAF’s yearly expenses of R21-billion has been spent on legal fees to respond to claims that have been contested by victims’ lawyers.
“So a lot of the money is not going to the primary recipient. That 20% amounts to roughly R4.7-billion, and feeds a micro economy of people who are doing legitimately what they know. But at a policy level you have to ask yourself: do I sustain this micro economy of professionals who, in truth, can trade somewhere else at the cost of millions of people who contribute, as well as the hundreds of thousands of people who are affected by the crashes?”
He estimates that the R4.7-billion spent on legal fees in the past financial year could have funded 47 000 claims instead.
Apart from avoiding the unnecessary expense, the financial benefits to the RAF will be significant. Watson says the institution’s financial position will improve immeasurably, in terms of both profitability and cash flow. He says that all other such schemes around the world — South Africa is the last country whose system is still based on proving fault — have not failed to record a surplus.
“In the RAF arrangement you have this extraordinary situation by which some people pay, and some of them may be in an accident and claim. You have people who don’t pay, but they can claim. Then, within the claim, general damages are not limited and the medical care [door] is open, so you don’t have a pricing you can forecast. That can never be sustainable.
“As soon as you define the benefit, the risk of volumes is not actually the most sensitive. The price of the benefit is the most sensitive. If you get that right everything else falls into place,” he says.
The move to what is expected to be a mostly uncontested claims process will also improve the speed with which claims can be settled and benefits payments can begin. Currently, contested claims could take up to 2 000 days to settle. By contrast, the turnaround for direct, complex claims is 700 days. This is expected to improve even further once the simpler Rabs processes are introduced and the RAF has implemented the automation of its processes.
Although there is not yet clarity on when the Rabs system will come into force, Watson says he and his team have already produced a number of business plans that cater to various scenarios that may come into effect. These plans also cater to the reality that the existing system will need to be phased out (the current RAF Act allows for claims to be lodged until three years after an accident). The organisation has therefore forecast its liability for such future claims at R109-billion.
As to whether — or to what extent — a healthier RAF would influence the levy charged as part of the fuel price, Watson smiles and happily deflects the question for the minister of finance to answer. He says he sees no reason for the levy to be retained once the tail of the claims under the existing RAF scheme has come to an end.