“Our insurance will cover us for that”…
Well, actually, it won’t cover the vast majority of the costs.
The HSE says that the true cost of an accident is £8 to £36 per £1 of insured costs. Essentially, insurance only covers a business for injury, ill health and damage.
To illustrate this, the HSE uses a diagram of an accident iceberg: what you can see above the surface pales into insignificance versus what is below the water:
Companies don’t really know what accidents are costing them
As ROSPA says:
“Most organisations do not know what accidents really cost them in time and money. Few bother to examine costs if and when they investigate accidents and incidents.
It is often assumed that most accident and incident costs are recoverable through insurance. This is a dangerous misconception.”
What are the uninsured costs?
There are two headline categories of uninsured costs: quantifiable and qualitative.
The quantifiable uninsured costs that organisations must pay following an incident can include:
- Lost time
- Sick pay
- Damage or loss of product and raw materials
- Repairs to plant and equipment
- Extra wages, overtime working and temporary labour
- Production delays
- Admin and investigation time
- Loss of contracts
- Legal costs
Now remember, you would need to pay most of these costs even if there was no insurance claim!
The qualitative costs that an accident can cause include:
- Human costs
- Loss of reputation
- Consequences on morale
- Effect on the NHS
Trying to be a bit more accurate about the true cost of accidents… plus learning some other interesting facts from senior H&S professionals…
We were keen to see if we could get a tighter banding of the true accident cost and therefore conducted some targeted research on Linkedin to ask senior H&S professionals about their businesses. 100+ responded. Here are the findings…
Accident frequency is reducing
56% of respondents said that they have seen a reduction in accidents taking place over the last three years. This correlates with the overall trend in UK H&S performance over the last 40-odd years which is showing a downward trend in workplace accidents.
90% of accidents do not result in an insurance claim
Interestingly, this correlates almost exactly with the well-known Heinrich’s accident triangle. This submits that for every 300 accidents with no injury, you will see 29 accidents with minor injuries and 1 accident with major injuries. So a 10:1 ratio of accidents to accidents that are serious enough to warrant a personal injury claim, whereas our research suggests a fractionally higher proportion of accidents leading to a claim (11%).
Anecdotally, though, there are examples of the number of claims rising:
“The amount of civil claims is increasing – the advent of fixed costs seem to mean no win no fee firms are starting more prospective claims hoping to get a quick pay out from insurers to close the case.”
Certain sectors appear more likely to receive claims than others.
Yes we’re having fewer accidents, but we’re suffering from higher costs
41% of respondents told us that the true accident costs they suffer had increased over the last three years, with only 29% saying costs had reduced. The changes to the discount rates have clearly affected the insured costs, but it does make sense that general inflation will have its effect on the uninsured costs too.
In a world where social media dominates in many ways, the potential reputational cost to your business of an accident is significant and rising. Within a matter of moments, the whole world could have access to the news that someone has suffered an accident in one of your buildings.
Almost half expect the cost of accidents to rise over the next three years
Cost inflation appears to be an ongoing challenge, with 46% of H&S leaders expecting costs to rise further over the coming three years versus only 24% forecasting a decrease.
One driver of cost inflation is demographics. With the Baby Boomer generation being more active into older age – both working longer but also taking part in more leisure activities, juxtaposed with the fact that older people are much more likely to suffer significant injuries if they have an accident, the likelihood is we’ll see an increase in average costs.
Slips, trips and falls are the most common cause of an accident
53.5% of respondents told us that slips, trips and falls were either the first (30.2%) or second (23.3%) biggest cause of accidents in their business.
In our experience, 80%+ of the “slips, trips and falls” category of accident are actually slips.
Based on our work with leading insurers such as AXA, RSA and QBE, we know that the typical insured cost of a slip accident is £10,000. We can therefore use this figure as a baseline to calculate the true cost of a slip accident.
The true cost of accidents is 10-12x the insurance claim cost
Compared to the HSE’s £8 to £36 of uninsured cost per £1 of insured cost, respondents to our survey gave a much tighter banding of £10-12 per £1 of insured cost. Just under 40% of respondents gave this answer – by far the largest response.
The true cost of an average slip accident therefore is £110,000 to £130,000.
Remember that many of the uninsured costs will be incurred even if there is no personal injury claim.
Admin and investigation costs, plus staff costs are consistently the largest uninsured costs.
When asked to try to rank the hidden, uninsured costs by size, four came out pretty consistently on top:
- Admin and investigation
- Lost time
- Sick pay
Investigating an accident, which needs to happen irrespective of whether there is a claim or not, is a huge hidden cost that drains time from your team. Paying the cost of both any staff off work injured and their cover mounts up quickly.
Fines tend to be seen as either a low cost, or a very high cost
20% of respondents cited fines as their single-largest cause of uninsured costs, yet 74% put fines as a very low cause of costs.
The changes in the H&S court sentencing guidelines in 2016 have seen a large increase in big fines, but it’s still the case that the vast, vast majority of accidents which lead to claims do not also lead to criminal proceedings.
Human costs are the key qualitative cost of an accident, reputation and morale are also perceived as important
Overwhelmingly it was the two elements relating to humans that concerned senior H&S leaders when it came to the qualitative hidden costs of accidents.
51% cited “human costs” as very important and 62% put “team morale” as either important or very important.
58% also felt that reputation costs were important or very important.
But we can do something about all of this…
Irrespective of the trends painting a picture of higher and higher costs with wider and deeper risk associated with hidden costs, overall there was a feeling of optimism that solutions are available:
“I’m objectively convinced that with appropriate H&S and cost management, together with adequate controls and staff training, number of accidents (and claims) can be significantly reduced and therefore the cost factor will naturally follow that.”
When it comes to slips, the biggest cause of accidents and claims as shown both in this survey but also by other industry statistics, we would love to help you. Please reach out to me for an initial discussion.