What is the social cost of a car crash?

In a vehicle crash the obvious cost is the damage to the vehicle but there is a social cost, too, as many other people are affected by the crash. The Ministry of Transport publishes social cost figures every year.

New drivers are at the most risk of crashing and they have the most potential value over their lifetime. The value of statistical life is set at $4.14 million per fatality (June 2016) and it is indexed to inflation.

The Ministry of Transport reports the social costs of an accident as:

• $4.18 million per fatality
• $439,100 per serious injury
• $23,400 per minor injury

Or, looking at it on a per-crash basis:

• $4.73 million per fatal crash
• $504,500 per serious crash
• $28,600 per minor crash

Bearing in mind many non-injury crashes are not reported and some crashes have multiple casualties, therefore the real number will be higher.

Why are the social costs so high?

The costs are high because they contain five elements:

Loss of life and life quality

When a life is lost, it cannot be productive and therefore there is a cost. That person would have worked for a number of years and the value now can’t be realised.

When life quality is lost, e.g. a person is permanently disabled, their enjoyment of life is affected and they are not as productive in the long term.

Loss of output due to temporary incapacitation

If a person is temporarily incapacitated, they will be unable to contribute productively to society. They may need retraining (often supplied by the government)

Medical costs

Hospitals and medical care are paid for by the government unless the person has private health insurance. Ambulances and other emergency services might attend the accident. Trauma counselling may be required.

Legal costs

Police and crash investigators must find out the cause of the accident and who is at fault. This can involve a number of investigative agencies. Prosecutions by the crown may be brought against the person at fault. Any fines must be followed up, as will insurance claims. If a driver goes to prison, those costs are borne by the government.

Property damage costs

In serious crashes there can be damage to road infrastructure such as the road surface, power poles, fences and traffic lights. Private property might also be damaged. Vehicles may need to be towed away. There may be health costs for local air pollution.

There is also the cost to other people – loss of business and increase in fuel use due to road delays, for example.

The total social cost of road accidents

The total amount is around $4.45 billion per year. 91% of this is social cost, 5% vehicle cost and other costs are 4%.