Many employers believe that the insurer will pick up the costs of an accident, and that's why they pay their insurance. However the costs of an accident can be broken down into the direct costs and indirect (uninsured) costs.
Direct costs of an accident
Direct costs are those costs that are accrued directly from the accident. They are quite easy to calculate, and include the medical costs incurred and the compensation payments made to the injured workers. Direct costs are usually insurable by businesses.
Indirect costs of an accident
Indirect costs are the less obvious consequences of an accident that can be costed. While the indirect costs created by accidents are hidden, they too must be paid from profits from the sale of products. They are more difficult to calculate and tend not to be insured. Indirect costs include:
- Time away from the job not covered by workers' compensation insurance;
- Payment of other workers who are not injured, for example those who stopped work to look after or help the injured worker and those who require output from the injured in order to complete their tasks;
- The cost of damage to materials or equipment involved in the accident;
- The cost of overtime imposed by the accident (lost production, additional supervision, and additional heat, light, etc.);
- The cost of wages paid to the supervisor for time spent on activities related to the accident. This includes caring for the injured, investigating the accident,and supervising the activities necessary to resume the operation of business. All of these activities will disrupt the supervisor's productivity;
- Costs associated with instructing, training, and repositioning employees in order to resume production. In some cases, it might even be necessary to hire a replacement with all the associated hiring costs;
- Medical costs paid by the employer that are not covered by the insurance. This may include treatment facilities, personnel, equipment and supplies;
- Cost of managers and clerical personnel investigating and processing claim forms and related paperwork, telephone calls, interviews, etc.
- Wage costs due to decreased productivity once the injured employee returns to work. This is due to restricted movement or nervousness/cautiousness on the part of the injured employee and time spent discussing the accident with other employees etc.
- Costs brought about from any enforcement action following the accident such as prosecution fines and costs of imposed remedial works.
The average estimated cost of accidents or occupational disease to employers (The HSE)
|Other Reportable Injury||£2,700||£2,600||£500||£5,800|
|Average case of ill health||£5,800||£2,300||£800||£8,900|