South Africa’s Road Accident Fund (RAF) has been a lifeline for many South Africans who were injured on our roads, or lost breadwinners, but proposed changes to the system could radically change the way that payouts are determined.

The proposed Standardised Compensation Formula aims to bring more fairness, efficiency and transparency into the system through the creation of an interactive online platform that would automate the calculation of settlement amounts based on a set of standardised formulae.

The financially embattled RAF argues that this is necessary given the inefficiencies and procedural delays that plague the current system, which is heavily reliant on human intervention.

The organisation believes the current process is compromised by the subjective inputs from medical, legal and actuarial professionals, leading to inequality in settlements, particularly among those who don’t make use of legal representation. It says highly skilled attorneys often secure larger settlement values.

Same payout for rich and poor?

Although it comes as no surprise that South Africa’s legal industry would be opposed to the RAF proposal, given the business that they stand to lose, experts have pointed out numerous legal red flags as well as potential drawbacks for higher-earning individuals.

Kirstie Haslam, partner at DSC Attorneys, argues that the RAF proposal not only appears illegal, but it also undermines the rights of victims to have their personal circumstances factored into the settlement amount.

“Legal experts argue that the RAF’s proposal not only misinterprets its own statutory mandate but also undermines the rights of victims by reducing their compensation to an algorithm-driven social benefit rather than an individualised legal entitlement,” Haslam said.

It ultimately means that standardised settlements might not reflect the real financial needs of victims based on their actual needs or actual income lost. For instance, higher-income and lower-income individuals may in future receive the same payout.

“The RAF has a long history of mismanagement, with billions lost due to inefficiency, corruption, and legal disputes. Instead of fixing its internal problems, the RAF is now attempting to cut costs by reducing payouts to victims,” Haslam added.

Legality of proposal questioned

She said the RAF was attempting to fundamentally alter the way damages are calculated without an amendment to the RAF Act.

“According to the Act, the Minister of Transport - not the RAF - has the power to set regulations, and any significant changes require Parliament’s approval. By acting unilaterally, the RAF is overstepping its legal authority and acting outside its mandate,” Haslam said.

Legal experts are also concerned about a lack of transparency in the process as victims would receive a computer-generated figure without any explanation as to how it was calculated. The current system, by contrast, justifies the amounts claimed through the use of detailed reports compiled by medical and actuarial experts.

Finally, personal injury lawyers believe the automated system could lead to more, rather than fewer, lawsuits as victims who receive unfairly low compensation will feel they have no choice but to take the RAF to court.

“Unlike human experts, an algorithm cannot be cross-examined or reasoned with - making legal challenges inevitable,” Haslam concluded.

Legal firms DSC, along with Sohn & Wood and A Batchelor & Associates, have jointly submitted an objection to the RAF over its proposed reforms, arguing that the battle is not just about numbers, but overall justice.

RAF argues for equality

However, in its Public Paper on the Standard Formulae proposal, the RAF argues that the current system's reliance on subjective judgement has led to disparities in settlement values for comparable road traffic injuries, leading to inequity for those who are less affluent.

“Claimants without legal representation are more financially prejudiced in comparison to those whose claims are submitted and expedited by adept attorneys, who, in consequence, secure larger settlement values,” the fund said.

“In response to these challenges, the RAF seeks to develop a standardised formulae for the accurate calculation of settlement values for Loss of Earnings, Loss of Support, and General Damages. Additionally, the creation of a streamlined online interactive platform to facilitate the computation of settlement amounts,” the RAF added.

It said the platform would be complemented by stringent medical categorisations for road traffic injuries, underpinned by international best practices and driven by research-based data.

However, as it stands, The RAF remains in a dire financial situation and last year came under fire from the South African Standing Committee on Public Accounts (SCOPA) after the entity received an adverse audit outcome for the third financial year in a row.

According to reports, the RAF is carrying an accumulated deficit of nearly R24 billion and is currently at loggerheads with the Auditor General over its accounting methods.

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