Transportation Safety and

environments (CIV544)

Accident cost
 Estimation of accident cost
 Accident causes considerable economic loss to
the nation.
 The monetary evaluation of accident cost is a difficult and
controversial subject.
 It is still becomes necessary to have an acceptable
approach for the quantification of accident cost.
 Review of alternative methodologies:
 A number of alternative methodologies are
available for accident cost. Hills and jones-Lee
summarized different approaches and have listed
the following six:-
 The “Gross output or human capital” approach
 The “net output” approach
 The “life insurance” approach
 The “court award” approach
 The “implicit public sector valuation” approach
 “Value of risk change” approach
 The “Gross output or human capital” approach

 It quantifies the cost of traffic accident as the sum

of real resources cost such as vehicle damages,
medical expenditure and police costs and the
discounted present value of the victim’s future
output.
 The value of prevention of an accident is defined
as the avoided cost
 Sometimes, a sum is added to the above cost to
reflect the pain, grief and suffering of the accident
victim
 The “Net output” approach

 It subtracts from the gross output value the

amount of the victim’s future consumption.

The “Life insurance” approach

 It treats the cost of an accidents or the value of accident
prevention as the sum of the real resources cost and the
amount for which typical individuals are willing to insure
their own lives.
 The “Court award ” approach

 It considers the amounts awarded by the courts to

the surviving dependents of those killed as
indicative of the cost that society associated with
the fatality or the value it would have placed on its
prevention. To the amount of court award are
added the resources cost such as vehicle damages,
medical treatments and police cost, to obtain the
total cost of accident
 The “Implicit public sector variation ” approach

 It is based on the costs and values that are

implicitly placed on accident prevention in safety
legislation or in public sector decisions taken
either in favor of or against investment programs
involving traffic safety
 The “Value of risk change ” approach

 It assumes that a typical public sector investment

in traffic safety provides each individual affected
with a very small reduction in the risk of
involvement in a fatal accidents. The value of
prevention of one accident involving one fatality
is defined, therefore, as an amount in aggregate
that all the affected individuals in society are
willing to pay for these small marginal risk
reduction, both for themselves and for those whom
they care.