Accidents clearly cost money because of injured people, damaged plant and machinery and wasted product. The HSE estimates that occupational injuries and illnesses cost the UK in the region of £20 to £30 billion pounds each year if the total costs to individuals, employers and society are considered. The costs of highly visible accidents involving large scale loss of life or major property damage as a result of fire and explosion are often determined by official inquiries.
The BP Texas City fire and explosion in 2005 cost over $21million in fines, $2billion in civil claims, and $1billion in reinstating the site. The Buncefield oil refinery fire in 2005 is believed to be the most expensive accident in UK history with a total cost of over £1billion, including £9.5 million in fines.
Smaller accidents have proved much more difficult to cost as relatively few companies have systems in place to quantify them.
HSE Guidance from 2002 “Reduce Risks – Cut Costs” (INDG355) identified three methods for quickly and crudely estimating uninsured costs of accidents.
- the uninsured costs of an accident are approximately 10x the insurance premiums paid
- Uninsured losses from accidents in smaller firms add up to £315 per employee per year
- The average uninsured cost of an accident causing absence from work is approximately £2100
As every business and every incident are different the only accurate way of determining costs is to measure them.
HSE Guidance from “Reduce Risks – Cut Costs” (INDG355)
Direct and indirect costs
Direct costs are those that can be easily attributed to an incident. They include costs such as:
- fines
- first aid
- sick pay
- medical treatment
- equipment repairs/replacement
- lost or damaged stock
- lost production time
- replacement staffing
Indirect costs can remain hidden. They may not be attributable to a single incident. However, an organisation will still incur losses over time if they have poor health and safety performance. They include costs such as:
- time spent investigating incidents
- loss of goodwill
- loss of reputation
- low staff morale
- lost contracts
- higher recruitment costs
- increased insurance premiums
Insured and uninsured costs
Further costs include those associated with replacement labour, accident investigation time, downtime, and increases in worker insurance premiums because of poor claims history.
If the accident has caused an injury, the injured worker may also be able to bring a personal injury claim for their injuries. Damages are awarded on a range of factors, including the loss of a faculty (such as sight or hearing), whether the injury is permanent, and its effect on the claimant’s ability to earn a living.
Accident and ill-health costs can be likened to an iceberg: costs that you can recover from insurance are visible. Those not covered by insurance are hidden below the water and are many times greater.
Some financial costs are covered by employers’ liability insurance. For example, suppose an accident has caused an injury. In that case, the injured worker may be able to bring a personal injury claim for their injuries. Damages are awarded on various factors, including the loss of a faculty (such as sight or hearing), whether the injury is permanent, and its effect on the claimant’s ability to earn a living.
However, not all costs are covered by such insurance, and the business will have to take those financial hits. Examples are:
- lost time
- sick pay
- fines
- re-training
- lawyers fees
- damage to stock/equipment
- loss of reputation
- lost contracts
Accident and ill-health costs can be likened to an iceberg: costs that you can recover from insurance are visible. Those not covered by insurance are hidden below the water and are many times greater.
