| The hidden costs of unintentional injuries |
When a company experiences a serious lost-time injury or death, the uninsured or indirect costs are often far greater than the compensation paid to the injured worker or his or her family
Workers who are injured are, for the most part, covered by workers’ compensation, and it is paid by the insurer, not the employer. But compensation to the injured worker is only a small part of the overall cost of an injury.
A group of actuarial students were engaged to measure the financial impact of injuries in a wide cross-section of governmental and private industry organizations. Some of the costs (fixing broken machinery, increases in workers’ compensation premiums) were directly quantifiable. The students were required to look at all costs, however, and they were challenged to put a dollar value on the significant human costs consequent upon an injury. They tracked the result of each injury for a period of one year from the date of the injury. The students were successful in placing a dollar value on several identifiable categories of costs. They also observed that their study was incomplete, as many organizations appear to continue to experience a financial burden after the end of the first year. Some costs, such as increased workers’ compensation premiums, could be expected to continue beyond the first year, unless drastic steps were taken to reduce injuries.
The students measured the impact for each of approximately 150 serious workplace injuries and deaths, and then scored the costs as a percentage of the compensation payable. (The costs varied so significantly that a range of average scores against the compensation paid or payable is shown after each category. To take the “average” cost, one would add up the low and high figures for each category, and give a total range.) It is noteworthy that the total costs amounted to a “low average” of 1.35 to a “high average” of 4.5 times the compensation paid to the worker in the first year after the lost-time injury. The low average tended to relate to more serious injuries and consequently higher compensation claims, and the high average to lower payouts. In every case, however, the costs were considerable.
Here is a list of the hidden costs (also called uninsured or indirect costs) the students identified:
Non-productive, paid time of fellow employees who assist the victim(s) after the incident, or whose productivity is disturbed (.1 to .3 of compensation payment)
Injuries do not happen in a vacuum. They occur to an associate, a person on the team. Whether the injured worker is a new employee or one who has been in the group for years, the incident is emotionally disturbing to the others. They cannot
be expected to keep the work flow going while waiting for the ambulance. The amount of down-time is directly related to the severity or horror of the injury. For a very serious injury or a death, the emotional disturbance can radiate throughout the whole organization, and affect productivity for hours, days or even weeks. Depending on how workers perceive the company’s handling of the incident, it can have long term negative consequences to work attitudes and overall morale.
Equipment taken out of production (.1 to .4 of compensation payment)
Equipment involved in an injury must be quarantined while an investigation takes place. It may have been damaged in the incident, and there may be further costs associated with repair.
Costs associated with missed delivery
dates, contracts that cannot be completed, or “playing catch up” (.3 to 1.0 of compensation payment) Whether the company works to “just in time” delivery dates, or renders services to others, disruptions in work-flow cause delays that are likely unacceptable to some customers. Workers may have to work overtime, contingency plans may have to be devised (always more costly than routine production), or a contract may have to be turned over to a competitor.
Cost of hiring and training replacement (.2 to .5 of compensation payment)
These activities involve several different people in the organization. Most companies are keenly aware of the considerable costs of hiring and training.
Time spent (no small amount, and stretching far into the future) on interviews with witnesses, investigation, completion of reports and multiple forms (.2 to .5 of compensation payment)
This again, has the potential for work disruption as workers are called away from their work, the work-site is disrupted when officials examine the equipment or scene of the accident.
Increased costs of workers’ compensation (.3 to 1.3 of compensation payment)
Managers do not always realize how much “just a few” compensationable injuries each year can cost. A company that has significantly above average claims may be required to pay double or triple the average amount in insurance premiums. We are not talking of pocket change here. The difference can run into hundreds of thousands, or even millions of dollars. Companies have been known to fail, simply because of a poor accident record. Conversely, premium costs can be reduced significantly if the accident rate is reduced.
Damage control costs (.15 to .5 of compensation payment)
These are the costs associated with getting everything back to normal. They also include costs associated with giving people an opportunity to vent feelings, meeting with aggrieved injured workers or their families, taking suggestions foravoiding a recurrence, increasing safety training, revamping engineering or administrative controls. Paradoxically, although “damage control” was identified as a “cost”, the evidence collected by the students suggested that this really could be considered an investment. The companies that worked fast, aggressively and effectively to right the situation and get everything back to normal, were best able to reduce the impact of the other six categories. The companies that down-played the injury, or even acted as though it did not happen, tended to have poorer lost-time injury records, and higher compensation costs.
(From a report by the University of Southern California)
|
|  
|
