Road Accident Fund

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 road accident. 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.

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 of several insurance companies in the 1960's, 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.

Finances

Broadly speaking, the extent to which the market value of the assets of the Road Accident Fund exceeds its outstanding claims reserves 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.

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.