True cost of accidents depends on profits

In today’s competitive business environment, controlling costs is more important than ever before. Most large U.S. companies operate at a small profit margin, some as small as a half percent. This means they earn only a half-cent for every dollar taken in. Profit margins of 1 percent to 5 percent are more common, but this is still not a lot of extra money. Each time an accident occurs, the cost of the injury must be subtracted from profits. So, how much do these incidents really impact your company in terms of direct and indirect costs? Take a look at how many additional sales are required to pay for industrial injuries.

What the chart tells us, basically, is that if the company is operating at a profit margin of 5 percent, then $20,000 in new sales will be needed to compensate for a $1,000 injury. If the profit margin is nearer 1 percent, an additional $100,000 worth of goods or services are necessary to keep that profit level. A lot of product must be manufactured to compensate for those losses. Because industrial back injuries average about $5,000 in expenses, every time a worker strains his or her back, other employees must work longer and harder to achieve necessary production levels.

As a case in point, motor vehicle accidents are the leading cause of work-related fatalities. Statistics show that of 5,000 people who died in work-related motor vehicle accidents:

• 82 percent involved a second vehicle

• 86 percent occurred in good weather

• 83 percent occurred on dry roads

• 69 percent occurred during the day

• 85 percent occurred on weekdays

Pre-accident planning is key to saving lives and controlling fleet costs. This pre-accident planning includes a written fleet safety program, training drivers on defensive driving techniques and providing well-maintaned vehicles.

Most accidents are preventable through the implementation of effective safety

and health control policies and programs. Accident prevention is simply good

business. It minimizes adverse health

consequences, promotes better working conditions for employees and heightens the company reputation with customers and employees alike, while increasing productivity.

Management should be responsible for providing the safest possible workplace for employees. Employees should be responsible for following safe work practices and company rules and for preventing accidents and injuries.

Carrying this thinking forward, it can be determined that a proactive attitude toward safety and a safe work environment can contribute directly to the bottom line. Though money is an important factor, personal

well-being and employee morale also are important. It is wiser to spend a bit more time doing the job safely than to have to recover from an injury. This is why it is so important for a company to actively promote safety.

David Endacott is a commercial insurance agent at Ollis & Co.[[In-content Ad]]