Overview of the Performance of the Road Accident Fund as captured in the 2011/12 Annual Report

1. Overview of the Performance of the Road Accident Fund as captured in the 2011/12 Annual Report • Financial Year 2011 - 2012 • 10 October 2012

2. Purpose • The purpose of this presentation is to provide the Portfolio Committee with an overview of the performance of the Road Accident Fund in 2011/12 • The presentation addresses the following elements: • Background • 2011/12 Indicators and Outputs • Audit findings • Priority focus areas

3. Background • Principal activities of the Fund • Provide compulsory cover to all users of South African roads against injuries sustained or death arising from accidents involving motor vehicles within the borders of South Africa. • Road Accident Fund Act, 1996 (Act No. 56 of 1996) & RAF Amendment Act, 2005 (Act No. 19 of 2005) • “The object of the Fund shall be the payment of compensation in accordance with this Act for loss or damage wrongfully caused by the driving of a motor vehicle” • Constitutional Court Rulings and legal precedents have shaped the mandate • Fund is a national public entity (Schedule 3A of the PFMA) • Board of Directors appointed by the Minister of Transport • Committee structure well established • Corporate and Statutory Form

4. Background • Mission, Vision and Values

5. Background • Strategic Objectives

6. Background • Business Model Revenue Grants & investment revenue Levy on fuel Fuel sold Road Activity Financial Position Administrative costs Number & severity of accidents Volume of claims Third party costs Value of claims Cost

7. Background 1 2. SYSTEMIC ENVIRONMENTAL Fault based & founded on insurance principles Benefit assessment is subjective and complex Inequitable benefits awarded • High accident rate and fatality rate • Strong interest groups • Significant fraud opportunities • Operational Context 3 FUNDING 4. OPERATIONAL • Disconnect between Fuel levy income and claim costs • Increasing future liability Delays in finalising claims Antagonistic customer interface Lack of integration between role players

8. Background • Accidents with fatalities increased by 3.6% (11,228) • Lead cause of death in persons younger than 30 years of age • 60 year funding regime driven by an “accessible” revenue stream • Deficiencies in the business model are now evident • Moved from protecting a wrongdoer from being sued to supporting victims • Compensation is fault based and must be proven or excluded • Rulings and Orders are not always consistent • Inequitable outcomes shaped by the legal spend and historic income • Legal officer with whiplash awarded R2.8m for a week off • Micro-economy has developed and is sustained by RAF payments • Lawyers, Advocates, Assessors, Experts etc • Contingency fees in excess of 25% • Scale of operation frequently overlooked • 50% of matters on the Court roll relate to road accidents • RAF is 4 x the size of the UK based Motor Insurer’s Bureau (£268m) • Claimants are not receiving all that is awarded • Operational Context

9. Purpose • The purpose of this presentation is to an overview of the performance of the Road Accident Fund in 2011/12 • The presentation addresses the following elements: • Background • 2011/12 Indicators and Outputs • Audit findings • Priority focus areas

10. Operational Indicators • Revenue

11. Operational Indicators • Core Expenditure

12. Operational Indicators • Operational Demand

13. Operational Indicators • Claim Cost

14. Operational Indicators • Claim Processing Reasons for outstanding claims: 90% of claims represented Case mix comprised of more “serious” cases Maximum medical improvement required Greater use of experts (industrial psychologists) Mvumvu Bill outcome awaited

15. Operational Indicators • Claim Processing

16. Financial Indicators • Statement of Financial Performance

17. Financial Indicators • Statement of Financial Position

18. Financial Indicators • Statement of Financial Position

19. Financial Indicators • Statement of Financial Position • Liability shaped largely by the Provision for Claims Incurred • Reasons for the increase in the liability in 2011/12: • Earlier assumptions were not sufficient • Claims are more expensive (as qualifications apply to damages) • Actual settlements are higher than estimates • Beneficiary base has been widened (Mvumvu case) • Closed cases reopened and additional amounts paid • Data for post-Amendment Act not credible yet

20. Operational Outputs • Governance • No audit findings and King 3 effectively applied • Compliance requirements met • Stakeholder relationship management • Minister and Deputy Minister • DoT, SATAWU, NT, DoH, FSB, DoJ, SADC counterparts • SACO, SANCO, AA, SANTACO • Financial management • Unqualified audit obtained • Procurement environment capacitated • Investment policy maintained • Legal and compliance • Regulations developed, submitted and some approved • Risk mitigation measures successfully implemented • Noteworthy Progress

21. Operational Outputs • Operations • 149,000 claims processed (one third pre-Amendment Act) • IT • No material downtime and claim systems maintained • HR • Performance scorecards introduced • Leadership Forum established • Customer Service Network • Origination infrastructure optimised • 29,060 claims originated directly (21% of personal claims) • Nelspruit regional office planned • 13,934 patients received continuous care • 1,849 home visits conducted • Over 440 mass burials attended to • Noteworthy Progress

22. Operational Outputs • Noteworthy Progress • Marketing • Over 2,000 people serviced at RAF on the Road • - In 2012: Over 4,500 people and R60m settled • Quarterly staff newsletter and CEO’s Blog introduced • Campaigns run on radio, TV and print media • Forensics • 6,782 cases finalised • 3,160 fraudulent files detected at a value of R461m • 502 arrests and 244 convictions in 2011/12 • Decade of Action for Road Safety 2011-20 • N3 Toll Concession (N3TC) • Providing trauma equipment at Leratong Hospital • RTMC on road safety measures aimed at the youth • Contributing to the SADC Transport Forum

23. Summary of Performance

24. Summary of Performance • 2011 – 2012 Performance • Particularly challenging operating environment (longstanding) • Significant work was executed with progress made! • Performance concerns relate to slower claim processing and the increased provision for outstanding claims • Increased number of open claims • Increased litigation and protracted claim settlements • Pended claims in expectation of legislative changes • Lower output per staff member • Increased claims liability and provision • Increased volume of open claims • Higher average cost of a claim • Must be appreciated that 149,000 claimants and there families were supported, in addition to 111, 628 previous claimants who have continued access to medical services

25. Purpose • The purpose of this presentation is to an overview of the performance of the Road Accident Fund in 2011/12 • The presentation addresses the following elements: • Background • 2011/12 Indicators and Outputs • Audit findings • Priority focus areas

26. Audit • Unqualified Opinion • Auditor-General findings • Emphasis of matter • Going concern status • Predetermined objectives • Achievement of planned targets • Compliance with laws and regulations • Accounting authority did not take adequate steps to prevent fruitless and wasteful expenditure • Opinion

27. Audit • Going Concern Status

28. Audit • Anomalous Expenditure • Note: • Values have reduced, disciplinary action was taken and an SOP has been developed • Entire amount is not fruitless and wasteful as there is a disjuncture between RAF Act and Attorneys requirements • Note: • Values have reduced, disciplinary action was taken and management intervention are focused on reducing this further through integration between procurement, legal and line functions.

29. Audit • Performance Targets

30. Audit • Performance Targets

31. Audit • Performance Targets

32. Audit • Performance Targets

33. Audit • Performance Targets

34. Audit • Performance Targets

35. Purpose • The purpose of this presentation is to an overview of the performance of the Road Accident Fund in 2011/12 • The presentation addresses the following elements: • Background • 2011/12 Indicators and Outputs • Audit findings • Priority focus areas

36. Priority Focus Areas • Processing open claims • Confirm the backlog by way of an audit • Repudiate unprocessed claims and run block settlements • Enhancing operational delivery • Optimise performance and increase capacity • Align structure to operational demand and business processes • Optimising Financial controls • Implement a Writ SOP and comply with policies and the PFMA • Take decisive steps where non-compliance occurs • Managing the deficit • Quarterly reviews of the provision, as well as independent reviews • As the provision is shaped by claims on hand, reduce the backlog • Definitively prioritise the amendment of legislation to remove fault and to define a set benefit • Mvumvu Bill and passengers • Paixao Supreme Court of Appeal Ruling and partners

37. Conclusion • The RAF operates in a context which is different to other entities in our social security framework: • Funding via the fuel levy is not associated with claim frequencies and costs • Beneficiary base is not constituted by past, present or future contributors to the RAF Fuel Levy • Benefits available to beneficiaries or claimants are not defined and in some instances are not limited to a maximum value • Social security obligation extends to protecting income, providing support, and funding healthcare needs

38. Conclusion

39. Conclusion • The Board and management have a firm understanding of what must be done, how it should be done and the urgency with which the work is required • All efforts will go into: • Ensuring that the four strategic pillars are fulfilled • Providing efficient support to the victims of car accidents • Preventing the catastrophic socio-economic effects of accidents in our society • It is proposed that the Portfolio Committee note this overview of the performance of the Road Accident Fund as captured in the 2011/12 Annual Report.

40. Thank You