ROAD ACCIDENT FUND LEGISLATIVE AMENDMENT BILL, 2004

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ROAD ACCIDENT FUND LEGISLATIVE AMENDMENT BILL,
2004

• Presentation to the
• Portfolio Committee on Transport
• 18 May 2005

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Agenda

• Strategic objectives
• Key assumptions
• Claims statistics
• Statistical overview of claims
• 2003/4 Auditor General Report
• Key achievements in 2004/5
• New initiatives in progress
• Strategic Recovery Plan
• Core-Business Re-alignment
• Comment on the Legislative Amendments
• Questions

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Strategic Objectives of the RAF

• To achieve excellence in RAF business processes
• To promote a road safety culture among road users
• To effectively manage stakeholder relations
• To eliminate fraud and corruption

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Key Assumptions

• New Claims lodged 185,000 per annum
• Current Claim backlog is 445,000 Discounted
  actuarial valuation is R18,5 billion as at 31
  March 2004
• Average cost of settlement R22,000 per claim
• Rate of Settlement to improve by 15
• Current proposed Legislative amendments will have
  minimal financial effect on 2005/6 budget will
  only have a material impact on 2006/7 budget
• Estimated annual fuel consumption is 18,3 billion
  litres

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Claims Statistics
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Statistical Overview
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2003/4 AUDIT REPORT

• Going Concern
• AFCT
• Controls
• Claims

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Key Achievements

• Average settlement costs have reduced in 2004
  from R27,758 in 2003 to R24,783 in 2004
• Claims that are finalised have increased
  incrementally on a year to year basis when
  comparing Claims finalised vs Claims lodged from
  66 in 2003 to 96 in 2004
• Claims settlement rate has increased dramatically
  when comparing total finalised vs total number of
  claims outstanding for 2004 financial year from
  120 in 2003 to 102 in 2004.

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Key Achievements (continued)

• Claims administration costs per claim has
  decreased dramatically from R3,651 per claim in
  2003 to R2,818 in 2004.
• Financial and budgetary controls have been
  streamlined to ensure effective operational cost
  management

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New Initiatives

• Claims backlog-special project was embarked on to
  settle high volume supplier claims.
• Validation of outstanding claims
  provision-project was embarked on to verify
  outstanding claims independently, as it is
  thought that a lot of fraudulent claims are
  included in the unsettled claims

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New Initiatives (Continued)

• Promotion of Direct claimants this should
  significantly reduce legal costs which
  constitutes a large portion of the total payout
• Forming strategic alliances with organs of state
  like the NPA and SAPS to reduce fraud

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New Initiatives (Continued)

• Cutting down on Fraud-RAF has joined alliances
  with SAPS Scorpions high success rate

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Strategic Recovery Plan

• Verification unit was established to validate
  claims lodged more accurately long before an
  offer is made to a claimant
• Evaluation of existing service providers to
  reduce reliance on them to enhance internal
  capacity
• Overall business process re-engineering underway
  to enable business improvement
• Agreement was reached with Legal profession to
  temporarily structure compensation payments in
  installments

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Strategic Recovery Plan (Continued)

• All service provider contracts reviewed to ensure
  proper service delivery BEE compliance
• New Integrated Claims Management System (ICMS)
  has been piloted and is in the process of being
  rolled out to all RAF regional offices
• Proper liquidity management process has been
  implemented that ensures accurate cash flow
  forecasting

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Core-Business Re-alignment 2004-2005
Business Area Implementation strategy Implementation impact
Top Structure re-alignment Strategy-structure alignment Efficient Corporate Plan delivery and re-alignment of business focus to RAF mandate
Direct Claims implementation Splitting of EL Region Walk-inn Centers Request statistics on accidents (hot-spots) Establish direct claims sections draft manual Establish a branch office in PE Improved accessibility Reduced legal costs Improved public image Efficient service delivery
Legal Costs Decentralise the function and integrate it into the main-stream claims process Reduce operational costs and improving accountability reporting
Alternative Dispute Resolution (ADR) Phased roll-out of Mediation Arbitration Reduce operational costs and improving actual client service delivery
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Core-Business Re-alignment 2004-2005
Business Area Implementation Strategy Implementation Impact
In-house Litigation Recruit and train competent staff Pilot the project with time lines Reduce litigation costs Develop staff
Suppliers Invoice Establish suppliers invoice section and draft policy Reduce backlog Reduce legal costs (summonses)
Career-pathing of non-legal staff Train and assess staff Retain staff
Core-Business Support Introduction of the ICMS Systems Standardisation and efficiency Better control on internal collusion
Direct Claims Phased (on BC) roll-out of WiC Redefinition of Customer Customer orientation
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Core-Business Re-alignment 2004-2005
Business Area Implementation strategy Implementation impact
Claims payment function Section is split from previous Accounting function to ensure focus on timeous, accurate and valid payments Resources will report to Snr Man Treasury in stead of Snr Man Fin Accounting
Undertaking payments Financial core activities to reside in Finance division Resources could potentially be reallocated from Undertakings HO to Finance HO
Procurement The final quality control and releasing of Purchase orders will be centralized at HO to comply to Supply chain best practices. No HR resource impact, only business process re-alignment
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Core-Business Re-alignment 2004-2005
Business Area Implementation Strategy Implementation Impact
Fixed assets Process of control over fixed assets register to comply with Supply chain best practices Better control over RAF assets and streamlined SLA service delivery between FM Procurement
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Core-Business Re-alignment 2004-2005
Business Area Implementation Strategy Implementation Impact
Performance Management Implement RAF customised Performance measurement and management Improved retention of talent Recognition of employees Improved service delivery
Policies Development Review and/or development of RAF-wide policies and procedures Improved accountability and compliance to legislation
Process Automation Identification and automation of other non-core business processes Best-practice to enable quick services turn-around times
Organisation Development Job Profiling of all Core non-core jobs Job evaluation of all jobs Salary Broad-banding Improved people management practices to ensure parity fairness thus enabling retention and development
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Core-Business Re-alignment 2004-2005
Business Area Implementation Strategy Implementation Impact
Human Capital Give effect to decentralisation Decentralising HC services and support in alignment with the core business requirements Empowering of HC in core business Repositioning of central HC as a centre of excellence Improvement of service decisions made at source, less delays, more accountability Research capability and therefore provision of guidelines, policies, frameworks that are based on best practice Implementation effected in the business
Corporate Compliance and Legal Services Merge Corporate Legal Services and Corporate Secretariat into one division reporting directly to the CEO Best practice alignment and improved co-ordination
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AMENDMENT BILL COMMENT

• The Fund does not hold any views on the Amendment
  Bill that are contrary to those put forward by
  the Honourable Minister and the Department of
  Transport, and is duty-bound and committed to
  effectively and efficiently operationalise and
  administer the proposed legislative changes, as
  soon as they are enacted.
• The Fund does not however intend to rely solely
  on the enactment of the proposed legislative
  changes to stabilize its operations and
  management.
• The Fund is of the view that there is
  considerable scope for improvement in this
  regard. Much has already been accomplished and
  more could be done. It is nevertheless imperative
  to note that the insufficient funding of the Fund
  over many years remains a cause for serious
  concern and will continue to bedevil the best
  intentions and efforts in this regard.

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AMENDMENT BILL COMMENT

• The Fund supports the proposal to extend its
  powers to conclude agreements with service
  providers and with fellow organs of state. The
  Fund would however request that the introductory
  part of the proposed new section 4(4)(a) should
  read as follows
• (4) (a) The Fund may conclude an agreement with
  any other organ of State regarding any matter
  affecting the Fund in order to improve or
  ensure

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AMENDMENT BILL COMMENT

• The Fund supports the proposed changes regarding
  the corporate governance of the Fund. It would
  however request that the possible implications
  for continuity in this regard be considered in
  conjunction with the commencement date of the
  changes.
• For reasons of social equity and administrative
  convenience the Fund supports the proposal that
  no special limitations should apply to the claims
  of passengers.
• The Fund supports the proposals regarding the
  capping of its liability, but considers that the
  proposed amounts may possibly provide inadequate
  compensation to claimants.

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AMENDMENT BILL COMMENT

• The Fund believes that the claims of foreigners
  should be treated as if the claimants were
  locals, and that the same limitations that apply
  to local claims should also apply to foreign
  claims.
• The Fund supports the proposal that it should be
  liable for emergency medical treatment regardless
  of fault on the part of any person. The Fund
  would however request that the momentous
  financial implications of this proposal be
  carefully considered.
• The Fund is of the view that its liability in
  respect of medical expenses needs to be fixed in
  accordance with a tariff or tariffs.

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AMENDMENT BILL COMMENT

• As regards the manner of effecting compensation,
  the Fund believes that it should have the choice
  to make payment of large sums in respect of
  compensation for future loss of income or support
  and of general damages, by way of a number of
  installments (not annuities) when considerations
  of balance sheet temporarily require that course
  of action.

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Questions