On 23 August 2022, the Pretoria News (accessed on IOL platform) reported that the Road Accident Fund (RAF) published a circular of a new directive to the effect that it will no longer pay claims for medical expenses which are covered by medical aids/insurers. The news was met with disapproval by most medical expenses insurers, with Discovery setting in motion proceedings to challenge the new directive in the Courts.

The reasoning behind the RAF’s decision appears to be centred upon the fact that claimants ought not to be compensated twice for medical expenses that arise out of the same damage causing event e.g where a claimant has already been covered for medical expenses by a medical aid insurer, then in such an instance RAF will not be obliged to compensate medical expenses as “the claimant has not suffered any financial loss” (due to the fact that such expenses have already been covered by the medical insurer).

Further, Discovery in particular, argues that the new directive is set to effect a massive financial setback for the industry in general. This is premised on the fact that the majority of insurers hinge their business on the subrogation principle, which entails that upon the insurer covering expenses for their insured, such expenses may be claimed back from the wrongdoer. This enables the insurer to recoup the expenses paid to the insurer from the wrongdoer, and contributes immensely for insurers to stay in business.

The publication reported further that Discovery alleged that it potentially stands to lose about R500 million a year, owing to the new directive.

The Road Accident Fund has allegedly and in recent years, not been on sound financial footing, which has seen it introducing a number of changes and requirements in the way they process claims, mostly with controversial effect. As we speak, there are several challenges brought against RAF for its failure to honour and settle claims.  

Our view is that, measures are necessary to ensure that the RAF’s financial soundness as a compensation body is revamped, without hampering the business prospects of other stakeholders in the industry. It remains to be seen how the courts will deal with the matter, and we shall update further on this platform.

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