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The RAF is not insolvent – Pieter de Bruyn

The RAF is not insolvent – Pieter de Bruyn
September 16, 2016 gnuworld
Road Accident Fund

Note: The copyright for the following article and interview belong exclusively to The original can be found at this location and it is provided here courtesy of Moneyweb.

‘They should just do their jobs and half of the financial problems will disappear’ – chairman of the Association of the Protection of Road Accident Victims.

Ryk van Niekerk | 13 September 2016 16:43

This interview is in response to an earlier discussion with Dr Eugene Watson, CEO of the RAF. Listen to/read the interview here.

RYK VAN NIEKERK: The Road Accident Fund has seen significant financial pressure over the past few years, the fund is technically insolvent, with liabilities of around R150 billion and is in the process to aggressively restructure its operations to reverse this situation. The proposals will see the existing RAF mandate, which is based on the common law claim for damages, change to one that is based certain prescribed statutory benefits, it will also function on a no-fault basis. With me in the studio is Pieter de Bruyn, he’s the chairman of the Association of the Protection of Road Accident Victims. Pieter, welcome to the show, you are deadest against these restructuring proposals. First of all what are your main concerns?

PIETER DE BRUYN: The key concerns are based on four issues, whatever changes are proposed for this industry needs to be properly planned, researched and consulted with the industry and the public. This hasn’t happened. Secondly, many of the proposals in the RABS Bill are unconstitutional and will not benefit the public. Lastly, the focus should be on solutions for the road accident victim, the intended changes will not have that as an effect.

RYK VAN NIEKERK: Let’s start with the current process, there is currently a bill, it has been published twice for comment, it has been through the Nedlac process. Dr Eugene Watson said recently in an interview with me that it has been discussed extensively in government and that it’s almost at the point of going to Cabinet, what are the main administrative issues?

PIETER DE BRUYN: Unfortunately Dr Eugene Watson is not very open about the true status of this draft bill. First of all, the Portfolio Committee on Transport twice rejected the RABS Bill in its form as it is and instructed the Road Accident Fund and the Department of Transport to go back and fix a number of key areas, including the funding model, the tariffs to be applied, as well as the impact on the fuel levy. That is yet to happen. Secondly, the process in terms of Nedlac was referred back with 27 major issues to be addressed. Nedlac rejected the RABS Bill. The ANC Study Group, which is a body you need to consult before you push an act to Parliament, is yet to be consulted. So Dr Watson is absolutely not being honest in saying this bill is about to be put to Parliament because it’s not possible to put it to Parliament as is.

RYK VAN NIEKERK: The unconstitutionality, what are your concerns there?

PIETER DE BRUYN: The Constitution guarantees bodily integrity. The Constitution also guarantees access to the courts, both of these constitutional rights will be negated to the point of being nullified by the RABS Bill. The detail and practical applications of this for the public and the people out on the street is not being made known or clear to the public but they are being touted with a silver bullet, everyone will have a claim, don’t worry, you will get money. It is not true.

RYK VAN NIEKERK: But the main concern about the current operations of the RAF that it is functionally insolvent, that it just cannot pay the amount due to road accident victims, there needs to be some reform to ensure that it’s actually more viable.

PIETER DE BRUYN: The only thing I agree with you is that some reform is needed. Firstly, the fund is not insolvent, you cannot plead poverty and insolvency for four decades on a constituitional right. It’s the same as to say in the next 400 R200 billion will be needed to build hospitals, therefore, the Department of Health is insolvent. That same argument is applied to the Road Accident Fund environment, it just doesn’t make sense. Secondly, in Dr Watson’s reference to R150 billion deficit, more than 80% of that deficit is a paper and actuarial deficit in terms of medical provisions made for possible future needs of patients, whilst less than 5% of them ever use it. So 95% of that paper deficit is not a real one but that is not explained properly. Lastly, and the most important issue, there is not a problem with the Road Accident Fund Act, there are two issues involving the application of the Act and the fact that the Road Accident Fund, as an organisation, for the last ten years stopped fulfilling the required mandate in the Act. They are supposed to make an offer to the claimant within a specified period of time. For the last decade they’ve stopped doing that, so they’ve basically stopped executing the Act. That requires a claimant then to seek help, the law provides for the fact that you can go to an attorney and unfortunately the attorneys, through the courts, then need to force settlement out of the RAF. The RAF is the biggest single course of 79% of the court cases of the RAF on the court role, then less than 1% goes on trial, why would they push claims on the court role to the day before trial and less than 1% goes on trial. They should just do their jobs and half of the financial problems will disappear.

RYK VAN NIEKERK: We’ll get to the lawyers just now. You said they stopped fulfilling their mandate, what do you mean, they are not doing their job?

PIETER DE BRUYN: They are absolutely not doing their job and, in fact, they are breaking the law in their attempts not to do their jobs by soliciting direct claims, which is not in the Act.

RYK VAN NIEKERK: Obviously that’s an operational issue, you say they are not soliciting claims, are they not doing their own investigations properly or are they more dependent on lawyers from the victim’s side to process a claim?

PIETER DE BRUYN: Let me go back to the good old days, ten years back, pre-2008, claims handlers in RAF offices had to receive a properly constituted claim, an application form, police record, hospital record and a medical record, and you had to substantiate your claim. Once you received that you had a short period of time to make an offer to the claimant. That happened by and large up until ten years ago. If you were unhappy with the offer you had the common law right to then get an attorney and engage with the RAF, the law provides for that, it’s a balancing act-type of solution. Ten years ago they stopped doing that, so what happens now is they ignore you for a year or two, the average time it takes to settle a claim is 55 months, so Dr Watson’s statistics are not accurate. Then you are forced to get an attorney, the attorney then interacts with the RAF, then still you don’t get any address, up until you have a court date for this matter to be argued in court and then all of a sudden on the steps of the court you get an offer. Why is that offer not just made within months of you submitting your claim? This is what the RAF Act is mandating them to do and they are not fulfilling that.

RYK VAN NIEKERK: So what you’re saying is that the internal procedures and the deficiency of the RAF is actually forcing victims to take a legal route and that just escalates the costs?

PIETER DE BRUYN: They have no choice, there are widely published documents on which the RAF themselves confirmed this. In a two-and-a-half-year period in one case 2098 and in another case 6000 claims were just allowed to lapse in the three-year period that they had to deal with this claim. Now, this is in a two-year period, which is proof that they are just not executing their mandate, whilst they are spending hundreds of millions of rands in creating posts to solicit direct claims, to deal with RAF on the road processes, to fund and donate money to the Comrades and to do all sorts of activities that they are not mandated to do. They should go back to the basics, be an administrator and compensate Road Accident Fund victims as per the Act, that is their mandate, they are not fulfilling that mandate.

RYK VAN NIEKERK: Let’s talk about the intermediary side, another argument can be made that with the implementation of the proposed reforms the intermediaries would see a significant reduction in business, you’re talking about lawyers, you’re talking about doctors, would that be the case?

PIETER DE BRUYN: That may be an outcome. If you go back again to the pre-2008 position when the system worked optimally, fewer cases necessitated a full range of medical experts, fewer cases necessitated an attorney to ultimately be argued in court. That’s part of the current snowed under nature of the system that there is a fair percentage of the smaller uncomplicated claims that are left unattended by the Road Accident Fund, they then necessitate an attorney and it becomes an expensive complicated process. So by default some of the intermediaries would maybe not have as much work as they had before. But that is not the point, the point is that the focus should be that the public should have access to the system, in RABS they won’t and I’m happy to explain that.

RYK VAN NIEKERK: We’ll get to the access. In the interview Dr Watson said the RAF spent around R5.6 billion on legal fees last year. Now, if I remember correctly, the total budget or the income of the RAF was around R30 billion, that seems to be a significant percentage of the income, which we all pay for via the fuel levy, to actually pay on legal fees.

PIETER DE BRUYN: The issue is why should Dr Watson spend R5.6 billion on legal fees if he and his organization makes an offer to a claimant, as the Act requires, claimants would not have the need to get an attorney to sue them, to get a court date and wrestle, over the next three or four years an offer on the steps of the court, out of them. The RAF themselves are the sole and the single biggest contributor to their massive legal bill by not executing and doing their jobs. But this is not explained, this is the main reason why 79%, on average, of high court rolls are made up of RAF matters, keeping in mind that less than 1% is heard by a judge. That settles the argument. The RAF and Dr Watson are the cause of this.

RYK VAN NIEKERK: But are there not lawyers who actually exploit the system? You hear stories about some unscrupulous lawyers not sticking to the prescribed fees and maybe also abusing the inefficiency of the RAF to actually go to court and to try and get higher settlements and, therefore, higher fees for themselves?

PIETER DE BRUYN: The comment on that quite simply, yes, like in any profession there are bad apples. You get bad doctors, you get bad teachers, you get bad attorneys. Therefore, the legal fraternity, together with the RAF, signed a memorandum of understanding to deal with these issues. Secondly, there are governing rules in terms of fees that are not clear, lawyers cannot ask 25% off the bat of your claim, they have to ask actual hours of work done and professional services rendered in finalising the claim up to a maximum of 25% and charge the lesser one. Keep in mind your attorney finds your hospital record, your police record, pays for medical reports, in many cases pays for transport to give you access to the system because it’s not given in the system, and for that risk and services rendered you need a professional fee for professional services. That’s no exception here but it has been blown out of proportion and the lawyers are being made the scapegoats of the cost. You must also remember that it’s a court of law deciding the size of the benefit paid to a victim, it’s not an attorney. An attorney is merely facilitating the process and a high court judge or a lower court legal expert decides the amount, not the attorneys. So that is an absolute misnomer.

RYK VAN NIEKERK: Another significant change would be the move to a no-fault principle, so anyone who is injured in a vehicle accident can claim against the fund, you are also against that change, why?

PIETER DE BRUYN: Well, let me put it in context, states in the USA, South Australia and countries in Europe attempted no-fault, countries like Canada with seven fatal accidents out of
100 000, the US 13 fatal accidents out of 100 000, attempted a no fault scheme and found it to be too expensive. South Africa’s figure is 165 fatal accidents per 100 000 with a 25% unemployment rate. There is no funding model provided for scrutiny, there is no impact assessment on the fuel levy, there is no budget provided to Portfolio Committee, to Nedlac, to the ANC Study Group, let alone to the industry of the public. So the claims that this is workable or will be cheaper is absolutely devoid from any proper homework or facts. No-fault is going to immediately add to the existing budget by at least R10 billion to R14 billion. That’s the impact of no-fault immediately. So how can that be less expensive?

RYK VAN NIEKERK: One of the arguments Dr Watson also made is that the proposed changes would benefit the poor more and that the current system is maybe more beneficial to the rich?

PIETER DE BRUYN: That’s absolutely nonsense and devoid from the fact. Less than 5% of all claims are in excess of 500 000, less than 5%. Secondly, the average dominant profile of a claimant is a mid-20s, semi-skilled to unskilled African male worker with either a low-income job, a part-time job or working intermittently. Thirdly, the size of the benefit paid, whether it be loss of support, loss of income or general damages for pain and suffering is decided by a judge, it’s not decided by the claimant or an individual. So the notion that white people are being benefitted by this is absolutely untrue. But, most importantly, in the new scheme and system all the hundreds and thousands of students out there advocating access to education, if you are a student in your final honours year and you have a very serious accident and you can’t work, the new scheme will see you as an unemployed matriculant. All the students, you are excluded. Secondly, two million public servants, if you are in a job more senior than a labourer or a clerk you’ll be above the threshold. Two million public servants will be excluded. The public, your threshold is set so low that you would hardly qualify, you’ll have to pay your fuel levy and then you’ll have to pay top-up insurance out of your pocket to be covered. What does that leave? That leaves unskilled, semi-skilled, low level or unemployed persons. But in the new system you wait for 60 days, then you, living in a village in Bogom in Limpopo, must go back to Maria, where you went for the Easter weekend, you go to the police station, you go and find your police record, you go to the hospital that treated you, wherever that may be, Nongoma in KwaZulu-Natal, you go and find your hospital record, then you find a medical doctor to write you a report. You pay for all of this, you do all of this, after 60 days you submit this, then you wait 180 days. If you don’t hear an answer you must know that your application has been declined, then you apply via email to the same authority who declined you and wait another 180 days. Then you must know your claim has finally been dislodged, then they want to put an exclusion of common law that you then have no more address after that. This system will exclude the exact people that Dr Watson is saying will have access to it. The last critical and important thing from a funding point of view is in terms of the RAF Act the funding is ring-fenced, the RAF, the Department of Transport and the government cannot do anything else but pay victims of road incidents. In the new proposed legislation that fund is not ring-fenced, so if they then spare R15 billion or R20 billion funding they can then use it for e-tolls, they can use it for PRASA, they can use it for SAA, they can basically then do with the funding what they want. Unfortunately our focus is what’s the solution for the future but the government and the RAF are not honest, nor are they genuine about what’s behind the RABS Bill and the RABS Bill has no way of succeeding the constitutional and the legal scrutiny.

RYK VAN NIEKERK: But what is the solution, the current scenario cannot continue.

PIETER DE BRUYN: The solution is what the industry has been doing the last 12 months, the industry formed five solutions committees, a committee looking at the act…

RYK VAN NIEKERK: Who is the industry?

PIETER DE BRUYN: For now I sue it broadly as represented by APRAV (Association of the Protection of Road Accident Victims) because APRAV is made up of various professional institutions, professional bodies, associations, it’s not so much individual members. So we have professional bodies being members of APRAV.

RYK VAN NIEKERK: Lawyers, medical professionals?

PIETER DE BRUYN: Yes those and people of the public, the Taxi Council of South Africa, academics, universities and so on. We formed five solutions committees under the guidance of Professor Hennie Klopper, we have judges involved, we have medical experts involved, we have attorneys involved, we have members of the public involved, we have unions involved and they focus on five areas. There are no big issues in the act, the big issues relate to the application of the act, so we are writing a new set of regulations, how this should be applied, who can apply, doing away with the double panel on certain issues and so on. Secondly, looking at the financial implication of this, so there’s a finance committee looking at the impact on the fuel levy, looking at the budget for this and looking at the viability to have some portions no-fault and maybe include some form of insurance. We have an inter-governmental committee looking at how Treasury should work along with the Department of Transport, should work along with finance, should work along with the Social Welfare Department, and how do we integrate these pieces with an absolutely broken public health system in South Africa, which is a dependent variable for the RABS Bill to function, although the Minister of Health is saying it’s ten to 15 years away. So Dr Watson is also not explaining that one. There’s a fourth committee then looking at what will the impact be on the public and how will we ensure that the system is faster, the 55 months must come down to 24 months, it must be cheaper, the average cost of a claim is R156 000, it should be reduced. There should be fewer role players with more money in the claimant’s pocket. APRAV, as an organisation, is busy working on these solutions but the Road Accident Fund is absolutely blind to anything else than what they believe, as opposed to the RABS Bill.

RYK VAN NIEKERK: Are you looking at trying to formulate proposals on how to reduce the number of accidents because that would solve many problems in itself?

PIETER DE BRUYN: That is the main cause and the main difficulty here, whilst we have 165 fatal accidents per 100 000, a no-fault system is absolutely not viable and that must be reduced by 90% to single digit figures like in developed countries. So no-fault is a great idea in England, Denmark and Australia, where they went to do the research but not in Africa.

RYK VAN NIEKERK: Thank you, Pieter. That was Pieter de Bruyn, he’s the chairman of the Association of the Protection of Road Accident Victims.

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