Page 18 - MetalForming January 2010

How Much
How Much
Does
Does
an
an Accident
Accident
Really Cost You?
Really Cost You?
Uninsured costs are difficult to measure, but it’s worth the effort because they can really hurt your bottom line.
BY RONALD M. PITCHER
Many companies, while navigating the cold and perilous waters of workers’ compensation, fail to comprehend the complexity of their accident costs in the workplace. Acci- dent costs are similar to an iceberg—the visible part of the iceberg corresponds to the direct “insured costs” of an injury claim, while hidden from obvious view are the larger indirect and usually unin- sured costs remain. It is these “unin- sured costs” that can lead to devastating affects to a company’s bottom line.
Workplace accidents have obvious, direct financial ramifications, including medical, hospital, and rehabilitation expenses, lost wages, higher insurance premiums and, in some cases, a total loss of insurability. However, there are many indirect costs that are usually uninsured and can seriously affect a
Ronald Pitcher is president, Pitcher Insur- ance, Palatine, IL: 847/705-5560; www.pitcherinsurance.com.
company’s profitability, and can be much greater than the insured loss.
These uninsured indirect workers’ compensation costs result from the marginal inefficiencies to the manu- facturing or service process caused by a work-related injury.
Premiums Just a
Small Part of Injury Costs
As an example, assume that one of your employees (unfortunately) suffers a serious injury on the job that requires surgery and eight weeks away from his job. It is relatively easy to measure the workers’ compensation benefits paid for this injury. In most states, your insurance carrier must pay, on your behalf, all medical bills associated with the injury and disability (wage-replace- ment) payments. Your workers’ com- pensation loss runs should give you a good idea of the total insured cost of an injury of this type.
However, traditional cost accounting typically fails to measure the addition- al uninsured costs related to these post- injury activities:
• The time spent by your supervi- sor(s) and human-resource staff responding to the injury, transporting the injured employee to the clinic or hospital, investigating the injury, and managing the claim throughout the entire process;
• The additional claim-response costs incurred, such as the cost of the ambu- lance, drug testing and first aid;
• Costs associated with the inactivi- ty of manufacturing equipment or inventory as a direct result of the injured worker’s absence, if he is not replaced at least temporarily. This equipment or inventory would be idle and complete- ly incapable of contributing to your production or delivery of services.
• The cost incurred by temporarily replacing the injured employee, which may take the form of overtime paid to existing employees, the hiring of a tem- porary worker or paying a job-place- ment firm.
• The direct cost of your operation being disrupted. While you may have temporarily replaced the injured employee, in many cases the replace- ment employee (either an existing employee or a temp) may not be as productive as the injured employee. The injured employee has been trained and is experienced, which might make them extremely difficult to replace in the short-term.
Also, the injury itself can prove very disruptive to other employees, who usually take time to discuss the injury, which affects productivity. In addi- tion, fellow employees may depend on the injured employee to optimize his own productivity and, because that
16 METALFORMING / JANUARY 2010
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