Accident Cost-Compensation &

Insurance

MANAK CHAND
JODHPUR
Manakchand.com@gmail.com
 What is an accident
• An accident or a mishap is an incidental and
unplanned event or circumstance, often with
lack of intention or necessity. It usually implies a
generally negative outcome which might have
been avoided or prevented
had circumstances leading up to the accident
been recognized, and acted upon, prior to its
occurrence.
 What is an mining accident
• A mining accident is an accident that occurs during the
process of mining of minerals.
• Mining accidents can have a variety of causes,
including leaks of poisonous gases such as hydrogen
sulfide or explosive nature gases,
especially firedamp or methane, dust explosions,
collapsing of mine stopes, mining-induced seismicity,
flooding, or general mechanical errors from improperly
used or malfunctioning mining equipment (such
as safety lamps or electrical equipment).
• Use of improper explosives underground can also
cause methane and coal-dust explosions.
 Mining Accident

Mount Mulligan mine disaster in Australia 1921, these cable drums were blown
50 feet (15 m) from their foundations following a coal dust explosion
What Are the Most Common Accidents Occurring
in the Mining Industry?
• 1. Methane and Consecutive Coal Dust Explosions
• 2. Blasting Related Accidents
-Fly-Rocks:
-Premature Blast:
-Misfires
-Mine-Induced Seismicity
• Mine Inundation
• Roof Fall/Side Fall
• Mechanical Failures
• Mine Transport Accidents
• Human Errors
 Cost of Accidents
• How much an accident actually costs a
company?
• The cost of a workplace accident affects a
company’s bottom line.
• Accidents are more expensive than many of us
realize due to hidden costs.
 Cost of Accidents
• Accidents are more expensive than most
people realize because of the hidden costs.
Some costs are obvious — for example,
Workers' Compensation claims which cover
medical costs and indemnity payments for an
injured or ill worker. These are the direct
costs of accidents.
• Visible costs such as medical expenses, costs
to replace equipment, fines and penalties are
easy to find and calculate, but it is not easy to
find information necessary to calculate the
hidden costs not directly associated with the
accident, such as the cost to train and
compensate a new employee, investigate the
accident or implement corrective action.
Direct and Indirect Accident
Costs
• A direct cost is a cost that can be easily and
conveniently traced to the accident such as
medical expenses and indemnity payments
while an indirect cost is a cost that cannot be
easily and conveniently traced to the
particular accident such as the salary of the
person investigating the accident.
• Direct costs of accidents
• Direct costs are those costs that are accrued
directly from the accident. They are quite easy
to calculate, and include the medical costs
incurred and the compensation payments
made to the injured workers. Direct costs are
usually insurable by businesses.
• Indirect costs
• Indirect costs are all the "uninsured" additional
costs associated with an accident. What is
important to realize is that indirect costs are
usually much greater than direct costs. Another
important point is that, unlike direct costs,
indirect costs are uninsured...they come right out
of the corporate pocketbook. These are the costs
that can drive a company into the red.
• Indirect costs are the less obvious
consequences of an accident that can be
costed. While the indirect costs created by
accidents are hidden, they too must be paid
from profits from the sale of products. They
are more difficult to calculate and tend not to
be insured.
The examples of indirect or uninsured costs:
• Lost production time.
• Productive time lost by an injured employee. Productive
time lost by employees and supervisors helping the
accident victim. Cleanup and startup of operations
interrupted by an accident.
• Time to hire or train a worker to replace the injured worker
until they return to work. Property damage.
• Time and cost for repair or replacement of damaged
equipment, materials or other property. Cost of continuing
all or part of the employee's wages, plus compensation.
• Reduced morale among your employees, and perhaps
lower efficiency. Cost of completing paperwork generated
by the accident.
• Govt. penalties.
• Other indirect costs include such factors as a
surcharge on the company’s insurance premium.
Other costs may include civil or criminal penalties
imposed by state or federal officials if the
accident is found to have resulted from flagrant
violation of workplace safety requirements.
• Studies have shown that such indirect costs
usually total three to four times the direct costs
of the accident and could amount to as much as
20 times the direct costs.
 Indirect costs also include:
• Time away from the job not covered by workers'
compensation insurance;
• Payment of other workers who are not injured,
for example those who stopped work to look
after or help the injured worker and those who
require output from the injured in order to
complete their tasks;
• The cost of damage to materials or equipment
involved in the accident;
• The cost of overtime imposed by the accident
(lost production, additional supervision, and
additional heat, light, etc.);
• The cost of wages paid to the supervisor for time spent
on activities related to the accident. This includes
caring for the injured, investigating the accident and
supervising the activities necessary to resume the
operation of business. All of these activities will disrupt
the supervisor's productivity;
• Costs associated with instructing, training, and
repositioning employees in order to resume
production. In some cases, it might even be necessary
to hire a replacement with all the associated hiring
costs;
• Medical costs paid by the employer that are not
covered by the insurance. This may include treatment
facilities, personnel, equipment and supplies;
• Cost of managers and clerical personnel
investigating and processing claim forms and
related paperwork, telephone calls, interviews,
etc.
• Wage costs due to decreased productivity once
the injured employee returns to work. This is due
to restricted movement or
nervousness/cautiousness on the part of the
injured employee and time spent discussing the
accident with other employees etc.
• Costs brought about from any enforcement
action following the accident such as prosecution
fines and costs of imposed remedial works.
• A series of costly accidents can reduce profits radically.
Accidents have obvious, direct costs such as medical,
hospital and rehabilitation expenses, workers
compensation payments, and higher insurance
premiums or even loss of insurability.
• But, accidents have less obvious, indirect costs that are
usually uninsured. These include the various
disruptions to normal work procedures, such as when
employees stop to help the injured employee, or even
a drop in production that cause inconsistencies with
delivery. If profits are not sufficient to cover costs, the
company may be forced to defer the procurement of
new equipment and facilities.
• Studies show more accidents that occur in a
workplace, the higher the costs — both in increased
insurance premiums and greater indirect costs.

Ratio of Indirect to Direct Costs

 Financial and Lost Opportunity.
• Financial costs are costs a company must pay as a
result of an accident and may include overtime
payments, repair costs, cost of extra materials, fines,
and penalties.
• Lost opportunity costs include those costs associated
with labour paid for no production, such as salary costs
of employees waiting to work, employees at home
unable to work while injured, and costs for machinery
running idle.
• Lost opportunity costs also include production and
resource losses due to interruptions in the production
cycle, the inability to mine previously identified
mineral resources and reserves, and the delay of
converting mined material into revenue through sales
or other types of financial transactions.
 HIDDEN COSTS OF ACCIDENTS
• An area of major concern to employers is the cost of
accidents. Many people do not realize
how much accidents really cost. In fact, many expenses
are not always obvious. Attention to
loss control can improve a company’s overall success.
• Where does the money come from to pay for the
results of accidents? Some people believe that
organizations have money set aside to pay for accident
costs. However, employers know that the money must
come from profits.
• People often try to minimize the costs of accidents by
saying that they are covered by insurance. Insurance,
however, covers only a portion of the total accident
cost. Moreover, as accident losses increase, so will a
company’s insurance premiums. It is clear that directly
and indirectly, accidents reduce profitability.
Total accident costs can be compared to an iceberg.
The part of the iceberg that can be seen above the
surface is like the smaller, direct portion of the total
accident costs. An examination of a serious accident
can give you a better understanding of what makes up
total accident costs.
• For example, an employee receives an electric
shock from faulty equipment and is seriously
injured. Many people in the department stop
working. Some rush to give first aid to the injured
person, while others call for help. When help
arrives for the injured employee, do employees
immediately return to work?
As soon as the injured person receives proper
medical treatment, your next job is to investigate
the accident. All time spent on accident
investigation and reporting as well as wages paid
to witnesses is included in the total accident
costs.
• If the injured person misses work for only a short time,
you may be able to make up for the production loss by
having the rest of the department work overtime.
• Overtime wages paid are included as total accident
costs.
• If the injured employee is gone for months, you may
have to hire and train a replacement worker. Typically
new employees are less efficient for a period.
• Damaged machinery may also reduce production as
you must make do with alternative
equipment while replacements or repairs are
complete. All this reduced efficiency represents
another indirect cost.
• Like an iceberg, the hidden costs of accidents are
not visible on the surface, but are still present.
Examples of such hidden costs:
• Production loss/worker distraction
• Training costs/replacement worker
• Loss of skill/efficiency - slowed production
• Paperwork
• Administrative time
• Loss of morale
• Legal issues
• Medical expenses
• Wages
• Equipment
• Workers compensation premium
• Just as there are many hidden costs due to accidents,
there are hidden savings in accident prevention. For
this reason, the phrase “loss control” is often used in
safety management. Every accident you prevent saves
direct and indirect accident costs - effecting your
bottom line. Other benefits of accident prevention
efforts include:
• Safe / uninjured employees.
• Property and materials will not be damaged.
• No disruption to production supervisors/managers
can focus efforts on other projects.
• Increased employee security at work.
• Examples of hidden costs can include:
- Damage to the vehicle or equipment the worker was using at
the time. This could require expensive repair or replacement.
- Loss of the worker’s time. There may be loss of time by fellow
employees and supervisors responding to the injury-causing
incident, or transporting the injured employee to the medical
facility.
- Temporarily lowered morale, efficiency, and productivity by co-
workers and supervisors.
- Cost of hiring and training a temporary or permanent
replacement for the injured employee, with lower productivity
during the hiring and training process. Also the other fellow
employees that have to pick up the injured employees duties
while he is absent from work (3 employees doing what takes 4
to do normally).
- The cost of Loss Control to investigate the accident, and
communicate with the insurance company.
- The time it takes your supervisor to complete the accident
report and communicate with Loss Control.
 The unknown costs of an accident
• There are other costs that are difficult or impossible to
measure that may have a "fatal" impact on the success of
the company. These are unknown or unknowable costs of
workplace accidents: morale and reputation.
• When a serious accident or fatality occurs in the workplace,
a very basic, negative message may be sent to employees:
"management does not care." The message may be subtle,
but it may be there. In many instances employee morale
suffers, and this usually negatively impacts the quantity and
quality of the work they perform.
• Another factor that might affect the long-term success of
the company is that of reputation. The reputation of a
company is a reflection of its public image and must be
considered as an important factor influencing its success.
Accident Compensation & Insurance
• Many employers believe that the insurer will
pick up the costs of an accident, and that's
why they pay their insurance.
• People often try to minimize the costs of accidents by
saying that they are covered by insurance. Insurance,
however, covers only a portion of the total accident
cost. Moreover, as accident losses increase, so will a
company’s insurance premiums. It is clear that directly
and indirectly, accidents reduce profitability.

Total accident costs can be compared to an iceberg.

The part of the iceberg that can be seen above the
surface is like the smaller, direct portion of the total
accident costs. An examination of a serious accident
can give you a better understanding of what makes up
total accident costs.
 • Disablement
Injury caused to a workman by an accident ordinarily results in
the loss of the earning capacity of the workman concerned and
this loss of earning capacity is technically "Disablement".
• Disablements can be classified as (a)Total and (b) Partial.
• It can further be classified Into (I) Permanent, And (Ii)
Temporary,
• Disablement, whether permanent or temporary is said to be
total when it incapacitates a worker for all work he was capable
of doing at the time of the accident resulting in such
disablement.
• "Total Disablement" is considered to be permanent if a
workman, as a result of an accident, suffers from the injury
specified in Part I of Schedule I or suffers from such
combination of injuries specified in Part II of Schedule I as
would be the loss of earning capacity when totaled to one
hundred per cent or more.
 • Accident Compensation
1. The employer of any establishment covered under
this Act, is required to compensate an employee
2. (A) Who has suffered an accident arising out of and
in the course of his employment, resulting into
3. (I) Death, (Ii) Permanent Total Disablement, (Iii)
Permanent Partial Disablement, Or (Iv) Temporary
Disablement Whether Total Or Partial, Or
4. (B) Who Has Contracted An Occupational Disease.
 Insurance Costs

• Employers Liability
• Public Liability
 Uninsured Costs
• Product and material damage
• Lost production time
• Legal costs
• Overtime & temporary labour
• Investigation time/Administration
• Supervisors time
• Fines
• Loss of expertise/experience
• Loss of morale
• Bad publicity
Accident Costs Iceberg
Insurance Costs

Uninsured Costs
 What Can Be Done to Prevent Mining Accidents?

• 1. Training Is Key
Compulsory Training Programs for Miners
Prevention Through Simulation
Blasting License
Administration Classes on Health, Safety, and Mining
Methods
• 2. Safety Legislation
• 3. Technology Standard
Personal Protective Equipments
Exploitation Infrastructure
Explosive Products
Thank you