Road Accident Fund
Encyclopedia
The Road Accident Fund in South Africa
is a state insurer established by statute. It provides insurance
cover to all drivers of motor vehicles in South Africa
in respect of liability
incurred or damage caused as a result of a traffic collision. Liability incurred in relation to property damage (such as damage to vehicles, buildings, vehicle contents) is excluded from cover. The Road Accident Fund operates a system whereby the claimant is assigned a percentage of responsibility for the accident, and the Road Accident Fund pays the claimant a percentage of a full settlement based on a percentage that was not deemed to be their responsibility. Insurance premiums are collected the Road Accident Fund through a levy on motor vehicle fuel
.
However, in response to the insolvency
of several insurance companies in the 1960s, the Motor Vehicle Accident Fund (a forerunner to the Road Accident Fund) was established to act as reinsurer to insurance companies in respect of their motor vehicle insurance cover.
In 1986, the collection of premiums via the fuel levy was introduced. Also, an "agency" system was introduced in which some insurance companies acted on behalf of the Road Accident Fund to manage claims. In 1989 the insurance system was extended to some of the states established within South Africa, namely Transkei
, Bophuthatswana
, Venda
and Ciskei
. But the "agency" system was found to be ineffective and it was phased out from 1993 with the last agency arrangement being terminated in 1997.
The Road Accident Fund took over from the Motor Vehicle Accident Fund in 1997 through the Road Accident Fund Act 56 of 1996.
is known as the surplus of the Road Accident Fund. The Road Accident Fund has been running large deficits (negative surpluses) for several years. The Road Accident Fund has attributed these increasing deficits to factors including the growth in claims amounts outstripping increases in the fuel level and claims fraud
.
South Africa
The Republic of South Africa is a country in southern Africa. Located at the southern tip of Africa, it is divided into nine provinces, with of coastline on the Atlantic and Indian oceans...
is a state insurer established by statute. It provides insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
cover to all drivers of motor vehicles in South Africa
South Africa
The Republic of South Africa is a country in southern Africa. Located at the southern tip of Africa, it is divided into nine provinces, with of coastline on the Atlantic and Indian oceans...
in respect of liability
Legal liability
Legal liability is the legal bound obligation to pay debts.* In law a person is said to be legally liable when they are financially and legally responsible for something. Legal liability concerns both civil law and criminal law. See Strict liability. Under English law, with the passing of the Theft...
incurred or damage caused as a result of a traffic collision. Liability incurred in relation to property damage (such as damage to vehicles, buildings, vehicle contents) is excluded from cover. The Road Accident Fund operates a system whereby the claimant is assigned a percentage of responsibility for the accident, and the Road Accident Fund pays the claimant a percentage of a full settlement based on a percentage that was not deemed to be their responsibility. Insurance premiums are collected the Road Accident Fund through a levy on motor vehicle fuel
Fuel
Fuel is any material that stores energy that can later be extracted to perform mechanical work in a controlled manner. Most fuels used by humans undergo combustion, a redox reaction in which a combustible substance releases energy after it ignites and reacts with the oxygen in the air...
.
History
The Motor Vehicle Assurance Act 29 of 1942 introduced compulsory motor vehicle insurance in South Africa. The purpose of this statute was to attempt to ensure that there was funding to meet the liabilities of all victims of motor vehicle accidents, whether or not the vehicles involved were used illegally. The emphasis of this legislation related to protecting pedestrians.However, in response to the insolvency
Insolvency
Insolvency means the inability to pay one's debts as they fall due. Usually used to refer to a business, insolvency refers to the inability of a company to pay off its debts.Business insolvency is defined in two different ways:...
of several insurance companies in the 1960s, the Motor Vehicle Accident Fund (a forerunner to the Road Accident Fund) was established to act as reinsurer to insurance companies in respect of their motor vehicle insurance cover.
In 1986, the collection of premiums via the fuel levy was introduced. Also, an "agency" system was introduced in which some insurance companies acted on behalf of the Road Accident Fund to manage claims. In 1989 the insurance system was extended to some of the states established within South Africa, namely Transkei
Transkei
The Transkei , officially the Republic of Transkei , was a Bantustan—an area set aside for members of a specific ethnicity—and nominal parliamentary democracy in the southeastern region of South Africa...
, Bophuthatswana
Bophuthatswana
Bophuthatswana , officially the Republic of Bophuthatswana was a Bantustan – an area set aside for members of a specific ethnicity – and nominal parliamentary democracy in the northwestern region of South Africa...
, Venda
Venda
Venda was a bantustan in northern South Africa, now part of Limpopo province. It was founded as a homeland for the Venda people, speakers of the Venda language. It bordered modern Zimbabwe and South Africa, and is now part of Limpopo in South Africa....
and Ciskei
Ciskei
Ciskei was a Bantustan in the south east of South Africa. It covered an area of 2,970 square miles , almost entirely surrounded by what was then the Cape Province, and possessed a small coastline along the shore of the Indian Ocean....
. But the "agency" system was found to be ineffective and it was phased out from 1993 with the last agency arrangement being terminated in 1997.
The Road Accident Fund took over from the Motor Vehicle Accident Fund in 1997 through the Road Accident Fund Act 56 of 1996.
Finances
Broadly speaking, the extent to which the market value of the assets of the Road Accident Fund exceeds its outstanding claims reservesOutstanding claims reserves
Outstanding claims reserves in general insurance are a type of technical reserve or accounting provision in the financial statements of an insurer. They seek to quantify the outstanding loss liabilities for insurance claims which have been reported and not yet settled or which have been incurred...
is known as the surplus of the Road Accident Fund. The Road Accident Fund has been running large deficits (negative surpluses) for several years. The Road Accident Fund has attributed these increasing deficits to factors including the growth in claims amounts outstripping increases in the fuel level and claims fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
.
External references
- http://www.raf.co.za/index.htm The Road Accident Fund website
- http://www.raf.co.za/content/statistic/AnnualReport2003.pdf Road Accident Annual Report 2003
- http://www.businessday.co.za/articles/economy.aspx?ID=BD4A400675 Business Day article
- http://www.raf.co.za/default.asp?szXml=services/undertaking&szXsl=Raf&reload_coolmenus Road Accident Fund explanation of undertakings and "blame" system.