New Tool Helps Companies Estimate Lost-time Injury Costs

When there is an accident in the workplace, the obvious costs include medical expenses and salary for injured employees, and repairing or replacing any damaged property. But it is the indirect costs that account for the majority of an accident's cost - as much as four to 10 times the direct expenses.

To help businesses understand the total cost of a workplace accident including indirect expenses The Hartford has created a cost estimation tool called the Losstimator. The tool is available on The Hartford's Web site at

Brian Hayes, executive technical consultant at The Hartford Financial Services Group, introduced the tool at the Risk & Insurance Management Society's (RIMS) conference in Chicago yesterday.

"Businesses often overlook a variety of costs, especially indirect costs when considering the total value of a workers' compensation claim," he said. "We've created the Losstimator to help quantify all the costs associated with a workplace accident so that they can be easily understood by financial professionals and used in determining the resources to put into safety and other loss-prevention programs."

Indirect costs of an accident can include items such as time spent investigating and reporting the accident and loss in productivity of co- workers who are distracted by the accident or need to undergo additional training to help fill in for the injured worker.

"In these tough economic times, showing financial professionals exactly how much a workplace accident can ultimately cost makes it easier to justify the expense of accident prevention," said Hayes.

Flexibility is an important benefit of The Losstimator, he notes. Risk managers or business owners can adjust the modeled information, creating company-specific scenarios to meet their needs. Once the data is entered, the Losstimator estimates either the cost of a single accident or an entire accident year. Depending on the user's preference, cost calculations can be based on an estimated aggregate of accidents that occur in the industry or on actual costs from a specific incident at that company. Additionally, accidents can be classified as low, medium or high severity, allowing a variety of scenarios to be modeled. The Losstimator then estimates indirect costs, including those associated with the injured worker, co-workers, lost profit, property and other general and administrative costs.

"Of course, the best workplace accident is one a company avoids in the first place, so it is important to have a good loss control program in place to help manage risk," added Hayes. "The Losstimator can help quantify total costs and demonstrate the financial gains that effective risk management programs can provide."

The Hartford has developed a "Top 10" list of risk management strategies to aid risk managers in protecting their businesses. These risk management strategies are:

  1. Complete a comprehensive loss analysis. Learn from the past and focus on allocating resources where they are most needed and most effective.
  2. Identify the true costs of losses and translate these costs into sales dollars. Use this information to allocate resources in a way that should help reduce or eliminate these losses.
  3. Tap into outside resources such as Web sites, literature, loss control staff. Insurance carriers, agents, professional associations and agencies such as OSHA are a great source of information and assistance.
  4. Perform a material handling assessment. Moving materials is a non-value adding activity and can cause high-severity losses.
  5. Perform an ergonomic assessment. Inefficient movements are non-value adding activities that can cause high-severity losses. Improving ergonomics can lessen fatigue and increase productivity and efficiency.
  6. Implement a change management strategy. Confronting changes in the operation up front can reduce risk management expenditures after-the-fact and avoid losses.
  7. Educate senior staff on fundamentals of risk management. Decisionmakers who are well educated about the purpose and benefits of risk management can be your best allies.
  8. Include a discussion of safety issues at all management meetings. Profitability, sales and quality are common topics at management meetings, and safety should be as well.
  9. Review product safety. Many firms provide safe workplaces but overlook the safety of their products. Problems with product safety can have a large business impact.
  10. Focus training on reducing specific losses and monitor the success. Don't train for the sake of training.
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