RAF amendments add to public’s financial exposure

November 2010’s Constitutional Court confirmation of the amended Road Accident Fund’s (RAF) capping of injury claims will increase the financial exposure of middle and upper income drivers.

“If you are in an accident and your medical and loss of earning costs exceed those set by the RAF, approximately R180 000 loss of earning per annum and limited cover for medical expenses, you will have to make good the shortfall” says Ian Labram, Manager, Aura Motor at Guardrisk.

This will see the growth of an insurance market competing to offer the critical top up cover that middle and higher income citizens will require beyond the limits offered by the fund.

The average taxi operator on the other hand is unlikely to take out passenger liability cover. Instead, the taxi industry is expected to rely completely on the RAF to compensate both injured drivers and passengers. Responsible public carriers and tour operators are likely, however, to provide their customers peace of mind by offering passengers additional personal accident or RAF top up cover.

In fact, for as little as R4 per seat per month public carriers can offer their passengers the comfort of R10 000 death cover, R 50 000 disability cover and

R 500 per day hospitalisation cover in the event of accident. While this will undoubtedly “increase the costs of these services it will also make them safer” adds Labram.

As per the original intention of the RAF Act these amendments will ensure that all parties injured on South African roads receive compensation for injury or loss of earning – even if only up to a limit set by the RAF. “Thereafter, however, everyone must pay for the cost of their injuries themselves or purchase the cover to pay for these costs” explains Labram.

As such, Labram believes that other public operators, particularly in the higher end market, including tour operators, are also likely to consider some sort of personal accident cover for passengers.