Motor fund on the skids

THE Motor Vehicle Accident (MVA) fund faces an accumulation of operational losses, administrative losses and an “actuarial deficit” of nearly N$520 million, driven by inadequate funding and fraud.

In real terms, the MVA, a de facto bankrupt outfit, is being kept alive only by Government guarantees. The “actuarial deficit” means that if all people who needed to claim were to demand payment from the MVA, the fund would crumble.The MVA fund has also declined into “technical” insolvency since its better days in the early 1990s.It recorded the highest ‘operating deficit’ in 2002 at N$59 million, though the deficit dropped to N$29 million last year.The Namibian has learnt that actuaries recently revealed the “dire” financial straits of the fund, which is meant to help victims of car accidents.This week the MVA began wholesale retrenchments aimed at restructuring the parastatal.The calculation takes into account the current total of claims that the fund has committed itself to pay as well as the accidents reported, but where claims have not been submitted.MVA Chief Executive Officer Jerry Muadinohamba yesterday declined to confirm the amount.However, he said:”Technically speaking, if we were a company, we would be declared bankrupt because we cannot meet our liabilities.”Until last year, people could claim an unlimited amount, which has since been capped to N$1 million per claim.The fund was set up to help cover loss of income, medical bills and for pain and suffering endured in motor vehicle accidents.But the limit has come too late for the MVA fund, which in certain cases paid individuals as much as N$3 million for supposed loss of future income.So serious is the situation that by last year the fund started to curtail payments as it struggled to meet the N$3 million in claims it had agreed to cover.With cash injections too low from fuel levies, the MVA fund has over the past few years depended heavily on Government guarantees to have access to money through overdrafts.Muadinohamba said the financial troubles of the fund were due to “exposure” through the legislation that allowed for unlimited liabilities, lack of skilled people to assess claims and fraud involving unscrupulous lawyers.He said the MVA was involved in talks with the Law Society about complaints that victims of accidents have lodged.Because of a lack of skill in assessing claims “diligently”, said Muadinohamba, “fraudulent claims could have been paid”.The MVA has launched preliminary investigations which could lead to a thoroughgoing probe into several cases.”We have leads, [and] we are investigating,” was all Muadinohamba was prepared to say when asked about the role of some lawyers, a number of whom have allegedly thrived for years on MVA claims.He said the MVA hoped the Law Society would discipline its members if they were found to have contravened the ethics of the legal profession.All 17 staff have been served with retrenchment notices.”This is a drastic situation that calls for drastic measures,” he added.But some of the measures appear to have irked lawyers who have gone to court to force the parastatal to pay.The MVA boss said they had been processing claims slowly because of the investigations as well as demanding “more and more facts” from claimants.”The fund needs to be repositioned for functional integrity to ensure that fraud and deviance is rooted out,” said Muadinohamba.The “actuarial deficit” means that if all people who needed to claim were to demand payment from the MVA, the fund would crumble.The MVA fund has also declined into “technical” insolvency since its better days in the early 1990s.It recorded the highest ‘operating deficit’ in 2002 at N$59 million, though the deficit dropped to N$29 million last year.The Namibian has learnt that actuaries recently revealed the “dire” financial straits of the fund, which is meant to help victims of car accidents.This week the MVA began wholesale retrenchments aimed at restructuring the parastatal.The calculation takes into account the current total of claims that the fund has committed itself to pay as well as the accidents reported, but where claims have not been submitted.MVA Chief Executive Officer Jerry Muadinohamba yesterday declined to confirm the amount.However, he said:”Technically speaking, if we were a company, we would be declared bankrupt because we cannot meet our liabilities.”Until last year, people could claim an unlimited amount, which has since been capped to N$1 million per claim.The fund was set up to help cover loss of income, medical bills and for pain and suffering endured in motor vehicle accidents.But the limit has come too late for the MVA fund, which in certain cases paid individuals as much as N$3 million for supposed loss of future income.So serious is the situation that by last year the fund started to curtail payments as it struggled to meet the N$3 million in claims it had agreed to cover.With cash injections too low from fuel levies, the MVA fund has over the past few years depended heavily on Government guarantees to have access to money through overdrafts.Muadinohamba said the financial troubles of the fund were due to “exposure” through the legislation that allowed for unlimited liabilities, lack of skilled people to assess claims and fraud involving unscrupulous lawyers.He said the MVA was involved in talks with the Law Society about complaints that victims of accidents have lodged.Because of a lack of skill in assessing claims “diligently”, said Muadinohamba, “fraudulent claims could have been paid”.The MVA has launched preliminary investigations which could lead to a thoroughgoing probe into several cases.”We have leads, [and] we are investigating,” was all Muadinohamba was prepared to say when asked about the role of some lawyers, a number of whom have allegedly thrived for years on MVA claims.He said the MVA hoped the Law Society would discipline its members if they were found to have contravened the ethics of the legal profession.All 17 staff have been served with retrenchment notices.”This is a drastic situation that calls for drastic measures,” he added.But some of the measures appear to have irked lawyers who have gone to court to force the parastatal to pay.The MVA boss said they had been processing claims slowly because of the investigations as well as demanding “more and more facts” from claimants.”The fund needs to be repositioned for functional integrity to ensure that fraud and deviance is rooted out,” said Muadinohamba.