Economic consequences of accidents

The costs of accidents are shared between the individual, the company responsible for the accident, the insurer and the public sector. Company s costs are normally not visible in their books of account. A traditional approach in accident research has been to develop models for use in the recording of accident costs to the company. Average results are then used in estimations of costs of future accidents. The aim is to make the losses associated with accidents visible to the management of the company. 

Early research on accident costs applied the market-pricing model. Here, the analyst registers the actual losses due to accidents for different production factors such as lost working hours, materials and production. These are assessed in monetary units by applying the market prices for each factor. The cost of lost working hours, for example, is set as equal to the hourly wage. Heinrich pioneered this work. He distinguished between direct and indirect costs, where direct costs are those paid by the insurer to the victim (Heinrich, 1959). Indirect (or hidden) costs include costs directly carried by 

Work hours spent on the investigation Work hours spent on repair of damaged equipment 

Lost work hours due to interrupted production or reduced productivity Costs of replacing damaged material 

Insurance expenditures Loss of income Costs of safety measures Company s costs for medical treatment 

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