Workers Compensation Total Cost of Risk
Thursday, May 6, 2010 at 11:55AM Chris Moxley 
We have all heard about the "iceberg" effect of claims. OSHA has spent considerable time and resources to research what these dollars actually are. According to the study the smaller the claim is, the higher the indirect costs associated with that claim are. This makes sense as there is a common cost to setting up a claim, doing associated paperwork, etc for all claims and this would certainly cost more as a percentage for smaller claims.
According to the study for claims under $3000 the indirect cost are 4.5 times the amount of the claim, 1.6 times for claims from $3,000 to $5000, 1.2 for claims between $5000 and $10,000 and 1.1 for claims above $10,000. Even though this is fairly easy to spreadsheet these numbers,there is a worksheet on OSHA.com that does the work for you. It goes a step further to show you what sales are needed to cover your claims. When we have done these in the past for clients, they are very surprised when you show them the number, but the amount of sales to cover the claim is where it really hits home.
What makes up these soft costs or indirect costs? Loss of use, loss of productivity, lost customers, damage to brand, lost contracts, investigation expenses, administration, bad morale among employees, time to attend hearings, etc. The list goes on and on. I would challenge those of you who have changed your culture to a more safe workplace to look at your financial statements and give the credit for the improvements to the reduction of these direct and indirect costs. For those who may struggle to get upper management to look at something besides sales, use the worksheet to show them the importance of safety and loss prevention.
