Cost of Accident

1
Cost of Accident Injuries to the Construction
Industry

• Written by John Everett Peter Frank

2
Outline

• Introduction
• Objective
• Description of methods Results
• Conclusion
• Q A

3
Introduction

• Injuries Fatalities on construction sites are a
  major problem
• Construction injuries are expensive
• The sharp rise in the cost of WCI 1985-1993/
  premiums increased 10.5
• Insurance premium are not the only cost result
  from workplace injuries and fatalities- indirect
  cost
• These cost place a large economic burden on
  contractor owner user of constructed
  facility.
• Realizing the magnitude of this problem in the
  construction industry

4
Introduction

• BR aim is to promote quality, efficiency, cost
  effectiveness
• Commissioned a study -1981- to examine the cost
  of injuries in the construction industry . The
  purpose of this study was to draw attention to
  the true cost of accident in the industry in the
  hope that contractor would undertake greater
  measure to curb these cost
• Result total cost of injuries fatalities in
  the construction industry account for 6.5 of the
  total cost of industrial, utility commercial
  construction ( 6.5 of 137 billion dollar 8.9
  billion)

5
Objective

• Since that time (1981) much had changed/ medical
  cost wide spread abuse of benefits- cause the
  cost of WCI to skyrocket.
• To determine the total cost of accident and
  injuries to the construction industry . This
  paper had gone through a detailed description of
  how the original figure 6.5 of the total cost
  was calculated - then the original input would
  be updated to show that total cost had risen to
  somewhere between 7.9 15 of total cost of
  new construction.
• It shows also that in addition to a moral,
  humanitarian commitment , owner have economic
  incentive to reduce the of Accid.

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Description of Methods Results

• the study was conducted by a team of 9 individual
  experienced in safety health issues
  representing Industrial owners, construction
  contractor the insurance industry
• Also to undertake some of the research for the
  study a team was selected from standford
  universitys department of civil engineering
  the CEM center at stanford provided the expertise
  and Personnel for the research stanford group
  was responsible for developing the study method
  assembling and analyzing the data.
• BR study team identified 3 types of cost relevant
  to owners in term of evaluating the cost of
  jobsite accident Direct cost, indirect cost and
  cost of safety program

7
Description of Methods Results

• Stanford was responsible for gathering
  analyzing 3 types of data
• 1. gathered data on the direct cost of
  injuries from WCI premiums other
  information.
• 2. survey was done for contractor rating
  agencies to get data about experience
  rating methods (EMR)
• 3. indirect cost was founded through
  questionnaire

8
Description of Methods Results

• Would describe the methods used to gather the
  data and how 6.5 had been calculated.
• Direct Cost of Accident Insurance
• Defined as the actual contractor cash flow that
  can be directly attributable to injuries
  fatalities .
• WCI
• Standard Premium manual rate payroll unit
  EMR
• Manual rates represents the average cost of
  accident administrative cost profit for the
  insurer per 100 dollars of straight time payroll
  for each work classification ( stanford 2-105
  direct labor dollar)

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Description of Methods Results

• Payroll units are found by dividing an employers
  direct labor cost by 100 dollar.
• EMR is based on contractors own accident history
• this factor can range from approx. 30 - 200
  depending on the frequency severity of injuries
  
• the median contractor would pay 100 million
  30 7.03 88 1,855,920 dollar
• of total direct labor cost - WCI premium
  1,855,920/ (100 million 25 ) 7.4

10
Description of Methods Results

• Public Liability Insurance stanford study shows
  that most contractor pay approx. 1 of direct
  labor dollar on liability insurance
• In Direct Costs of Accidents
• Includes (loss of productivity, disruption of
  schedule, admnistrative time for investigation
  report, training of replacement personnel, wages
  paid to the injured worker, and others for time
  not worked, clean up repair, adverse puplicity,
  equipment damage third party liability claims)
• Indirect cost calculated by multiplying the
  direct cost s by an indirect cost multiplier, (
  4 , 1.6 total of all indirect cost of injury/
  total benefits paid for injuries

11
Description of Methods Results

• Cost of Safety Program
• includes salaries for safety, medical,
  clinical perssonel, safety meeting, inspection of
  tools, orientation session, site inspection ,PPE,
  health program (2.5 )
• Calculation of total cost of accident (BR)
• insurance cost to construction industry 137
  billion 25(1 7) 2.74 billion dollar
  (1979)
• total dollar spent on construction
• of construction direct labor
• liability insurance
• cost of WCI

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Description of Methods Results

• Accident cost to construction industry 65
  2..74 billion 1.78 billion dollar (65 actual
  claim benefits 35 IC overhead)
• Conservative figure of 4
• Cost of accident (14) 1.78 billion dollar
  8.9 billion dollar
• of cost due to accident 8.9 billion dollar /
  137 billion dollar 6.5

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Description of Methods Results

• Recalculation of cost of accident
• Direct cost
• cost to construction industry 268.6 billion
  dollar2528.6696.318.53 billion dollar
• Direct cost 65 18.53 billion dollar
  12.05 billion dollar
• Indirect cost indirect (WCI) Indirect
  (other) Indirect (claims)
• (35 18.53 billion)(0.8554.87 )
  (0.2345.13)12.05 billion (268.8
  billion 1.55)0.57 4.16 billion 19.89
  billion dollar
• Total cost of accident 12.05 b 19.89 b
  31.94 b dollar
• of construction cost due to accident 31.94
  b/268.6 b 11.9

14

15
Conclusion

• Showed the cost of accident Injuries risen
  from 6.5 (1980) to between 7.9 and 15 (1996)
• However, there are other costs of accident to a
  contractor that have not been included ( OSHA
  cost, decrease employee morale, less of future
  work,)
• WCI cover the DC of todays injury, these
  injuries will cause a contractors EMR to rise in
  future years and increase future WCI premiums
• Recommends hiring of safe contractors

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• Questions