Direct and Indirect Accidents Costs

Presented by QBE Loss Control Services

Why Evaluate Accident Costs• Reliable costs needed for decision

making• Estimation of cost savings from safety

expenditures• Dollar savings may be more

meaningful to management than incident rates

Direct Costs (Insured)

• Definite and known costs- Worker’s compensation premium

- Costs for repair/replacement of damaged equipment/materials

Indirect Costs (Uninsured)

• Other non-billable costs that result from internal systems adapting to the accident. Usually account for 70%-90% of the total true accident cost.

Hidden Costs Of Accidents

Direct Costs

IndirectCosts

Like This Iceberg, Hidden Costs Of Accidents Are Not Visible On The Surface, But Are There Just The Same!

Indirect Costs• Wage of injured worker for part of day

missed due to accident• Wage costs of other workers• Property damage not covered by

insurance• Administrative costs• Litigation

Loss of Productivity• Injured worker(s)• Malingering following injury• Damaged equipment• Damaged or lost product• Other employees time• Supervisors time• Rescheduling

Loss of Productivity• Subcontracting• Decreased production while new

employee is trained• Down time• Interviews/investigation• Cleanup after accident

Training

• Time

• Development costs

• Planned or unplanned

Hiring Replacement

• Interview

• Orientation

• Drug Test

• Physical

Morale-Consequences

• Poor safety practices

• Work slows down

• Poor workmanship (quality)

• Lack of respect for management

Legal Costs• OSHA Fines• OSHA- Cost/Time to correct

violations• Legal

- Depositions- Information Searches- Attend court proceedings

Human Resources

• Insurance forms

• Accident investigation

• Medical management

• Recordkeeping

• Finding light-duty jobs

Direct vs. Indirect Costs

• Indirect Costs

• Are from 2 to 20 Times

• Direct Costs

Did you Know?• Claims reported more than 3 days after

injury can add: 16% to Medical Costs 38% to Indemnity Costs

• Claims reported more than 12 days after injury can increase the likelihood of Attorney Representation by: 67% for Medical Claims 69% for Indemnity Claims

Sales required to pay for an accident

100,000 50,000 33,000 25,000 20,000

500,000 250,000 167,000 125,000 100,000

1,000,000 500,000 333,000 250,000 200,000

2,500,000 1,250,000 833,000 625,000 500,000

1% 2% 3% 4% 5%

$1000

$5,000

$10,000

$25,000

Profit Margin

Acc

iden

t

C

ost