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
Like This Iceberg,
Hidden Costs Of
Accidents Are Not
Visible On The
Surface, But Are
There Just The
Same!
Indirect
Costs
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
Profit Margin
1%
2%
3%
4%
5%
100,000
50,000
33,000
25,000
20,000
$5,000
500,000
250,000
167,000
125,000
100,000
$10,000
1,000,000 500,000
333,000
250,000
200,000
2,500,000 1,250,000 833,000
625,000
500,000
Accident
Cost
$1000
$25,000