DIRECT AND INDIRECT ACCIDENTS

COSTS
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

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DIRECT COSTS (INSURED)

• Definite and known costs

- Worker’s compensation premium
- Costs for repair/replacement of damaged
equipment/materials

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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.

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HIDDEN COSTS OF ACCIDENTS

Direct
Costs

Indirect
Costs

Like This Iceberg,

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

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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

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LOSS OF PRODUCTIVITY
• Injured worker(s)
• Malingering following injury
• Damaged equipment
• Damaged or lost product
• Other employees time
• Supervisors time
• Rescheduling

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LOSS OF PRODUCTIVITY
• Subcontracting
• Decreased production while new employee
is trained
• Down time
• Interviews/investigation
• Cleanup after accident

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TRAINING

• Time
• Development costs
• Planned or unplanned

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HIRING REPLACEMENT

• Interview
• Orientation
• Drug Test
• Physical

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MORALE-CONSEQUENCES

• Poor safety practices

• Work slows down
• Poor workmanship (quality)
• Lack of respect for management

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LEGAL COSTS
• Labor Act Fines
• Labor Act- Cost/Time to correct violations
• Legal
- Depositions
- Information Searches
- Attend court proceedings

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HUMAN RESOURCES

• Insurance forms
• Accident investigation
• Medical management
• Recordkeeping
• Finding light-duty jobs

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DIRECT VS. INDIRECT COSTS

• Indirect Costs
• Are from 2 to 20 Times
• Direct Costs

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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

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 Profit Margin

SALES REQUIRED TO PAY FOR AN ACCIDENT

1% 2% 3% 4% 5%
100,000 50,000 33,000 25,000 20,000

1000
500,000 250,000 167,000 125,000 100,000
Cost

5,000
1,000,000 500,000 333,000 250,000 200,000
Accident

10,000 2,500,000 1,250,000 833,000 625,000 500,000

25,000

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