SA actuaries recommend a hybrid compensation system for road accident victims

South African roads are notoriously dangerous, with high alcohol use and general disregard for traffic laws resulting in thousands of crashes every year.

In 2025, more than 11 000 lives were lost in road accidents, while many more people would have suffered terrible injuries.

According to South African actuary George Schwalb, it is unlikely that many of the 2025 accident victims or their families would have received financial compensation from South Africa’s Road Accident Fund (RAF). Some claims relating to accidents that occurred more than 20 years ago are only now proceeding to trial.

“A sad reality is that anyone involved in a serious car accident and in desperate need of financial assistance from the RAF is likely to wait many, many years before the claim will be processed and money paid. For many victims of road accidents and their families, this will mean insufficient emergency treatment, financial hardship and also delayed long-term medical care and rehabilitation.”

Commissioned by the Actuarial Society of South Africa (ASSA), a team of three South African actuaries, consisting of Gregory Whittaker, David Rodda, and Schwalb, therefore set out to find solutions for a more viable compensation system for future victims of road accidents.

Their findings are presented in a recently published research paper titled "Towards a reasonable, affordable, equitable, and sustainable road accident compensation system”. The paper unpacks options to guide the reform of South Africa’s beleaguered RAF, a publicly administered compensation scheme funded by a fuel levy and available to anyone impacted by an accident not caused by them. While the RAF reported a deficit of R2.3 billion at the end of March 2025, the real deficit is believed to run into hundreds of billions of Rands, according to Schwalb.

He says audits, forensic investigations, parliamentary inquiries, and litigation outcomes have highlighted systemic failures across financial management, governance, legal compliance, and institutional accountability. Yet, multi-agency attempts to reform the RAF and its processes have proven fruitless.

“Hopefully, the new RAF board and management will be able to implement a turnaround strategy to improve the processing and settlement of current claims,” adds Schwalb. “For the long term, however, our research shows that no single model, including the RAF, fully addresses the country’s requirements, and that reform would require a hybrid approach supported by enhanced governance.”

The paper therefore makes a strong case for replacing the current system with a robust, financially stable hybrid solution that will fairly and timeously compensate future road accident victims.

Utilising actuarial, legal, economic, and institutional analyses, the three actuaries compared the current system with two alternatives: the proposed no-fault Road Accident Benefit Scheme (RABS) and compulsory third-party insurance offered by private insurers.

The purpose of the research was to investigate alternative systems and not to design an optimal hybrid system, says Schwalb. He adds that there are elements in the design of all three options–RAF, RABS and compulsory third-party insurance–that in combination have the potential to provide a reasonable, equitable, affordable and sustainable solution that will work for South Africa.

The RABS Bill, on the table since 2013, was introduced to replace the current fault-based RAF system with a no-fault social insurance scheme. RABS was designed to provide defined benefits to all accident victims, regardless of fault, through an administrative process rather than litigation. No-fault benefits make it possible to provide for immediate medical care, but various interest groups have strongly opposed the RABS Bill for over a decade, mainly because the proposed system would also pay unreasonable benefits in many cases, remove the right to take civil action against the other party involved in the accident, and discourage the need for legal representation.

Schwalb says that while compulsory third-party insurance works well in developed countries, non-compliance is rife in developing countries because many vehicle owners consider it too expensive.

“After weighing the strengths and weaknesses of each model, we conclude that no single approach satisfies all four criteria simultaneously. The RAF offers comprehensive rights but struggles financially and administratively. RABS promises efficiency but raises legal and reasonableness concerns. Compulsory third-party insurance harnesses market mechanisms but faces compliance risks. A hybrid system could, however, integrate elements of all three models.”

Various viable combinations could be considered, says Schwalb. One such option would be a system that provides basic no-fault benefits for medical care and rehabilitation, supplemented by fault-based liability insurance for additional damages, delivered through a public-private partnership that includes the current RAF and private insurers, all under strong regulatory oversight.

According to Schwalb, replacing the RAF with an alternative will also require a period during which funding will be needed for the new systems, as well as for providing RAF benefits to victims of accidents that occurred before the introduction of the new system. “This is likely to be unaffordable in practice, and a hybrid scheme could be introduced in such a way to overcome this problem.”

He concludes, however, that redesigning a new road accident compensation system is not enough. “Any reform must also include improvements in governance, transparency, and actuarial monitoring."

“Even the most robust policy framework will fail if it is poorly administered. The RAF’s challenges illustrate how governance failures can undermine a well-intentioned scheme. Strengthening management capacity, reducing fraud, improving claims processing, and enforcing accountability are therefore as important as choosing the right model.”