Technical notes Part 2 - The Social Cost of Road Crashes and Injuries

A2 Estimation of injury and crash costs

A2.1 Cost components

The price indices used in updating the social cost components are included in Table B2 (Appendix B). For a detailed discussion of the methodology, please refer to The Social Cost of Road Crashes and Injuries: June 2006 update.

(i) Loss of life and life quality

• The cost of pain and suffering due to the loss of an unidentified life from a road crash is estimated by the amount of money the New Zealand population would be willing to pay for a safety improvement that results in the expected avoidance of one premature death (ie the willingness-to-pay-based value of statistical life or VOSL).
• The VOSL was established at $2 million in 1991. This has been indexed to the average hourly earnings (ordinary time) to express the value in current dollars. The updated VOSL is $3.35 million, at June 2008 prices.
• As in the previous update, the average loss of life quality due to permanent impairments from a serious injury is estimated at 10% of the VOSL (or $335,200), and 0.4% (or $13,400) for a minor injury (see Miller et al., 1991; Guria, 1993a; and Guria, 1993b).
• These values also include the loss of productivity caused by long-term impairments (see Miller and Guria, 1991; and Guria, 1993a).
• The values of loss of life and life quality are calculated on a per-injury basis. These values are incorporated into the average cost per crash, considering the average number of injuries (for each injury severity) involved in a crash during the three years to 2007.

 (ii)  Loss of output due to temporary incapacitation

• The loss of output due to temporary incapacitation is estimated by the product of average daily earnings per person and the average time loss per injury, and is calculated on a per-injury basis.
• The matching of the TCR injury data with the hospitalisation data for the three years to 2007 shows that the mean length of hospital stay is 12.57 days for a reported serious injury and 2.52 days for a reported minor injury. These data are used to approximate the average time loss per injury.
• Using the average daily earnings distributions by age group and gender, the weighted average daily earnings for the road crash injury population for 2005 to 2007 are estimated at $109.7 at June 2008 prices.
• The cost estimate is incorporated into the average cost per crash by considering the average number of injuries involved in a crash, for each injury severity, during the three years to 2007.

(iii) Medical costs

• Medical costs include three components: hospital in-patient medical costs; emergency treatment costs; and follow-on treatment costs.
• The methodology used to allocate medical costs by injury severity and cost component is the same as that in the previous updates. All cost estimates were updated for price changes using the producers’ input price index for health and community services.
• The in-patient hospitalisation cost for a serious injury was based on those estimated in (Langley et al., 1991).
• The in-patient hospitalisation costs for fatal and minor injury were assumed to be 40.5% and 1.4% of the same costs for a serious injury, respectively (see Guria, 1993a).
• The emergency treatment cost for a serious injury was assumed to be 12% of its in-patient hospitalisation cost. Emergency treatment costs for fatal and minor injury were assumed to be 270% and 60% of the emergency treatment cost for a serious injury respectively.
• The follow-on costs for a serious and minor injury were assumed to be 49% and 2.4% of their in-patient hospitalisation costs respectively. There is no follow-on cost for a fatal injury.
• Medical costs are calculated for each injury severity type and are incorporated into the average cost per crash, considering the average number of injuries (for each injury severity) involved in a crash.

(iv)  Legal and court costs

• Legal and court costs include three components: the justice system costs of dealing with traffic offences; the cost of police crash attendance and investigation; and the cost of imprisonment.
• Legal and court costs were based on those estimated in 1993 (Guria, 1993a) and were updated for price changes with the producers’ input price index for legal services.
• The relativities of legal and court costs between serious crashes and other crashes were assumed to be the same as those in the previous updates. It was assumed that a fatal crash would incur legal and court costs 6.92 times those of the cost for a serious crash.  For minor crashes and property-damage-only crashes, the legal and court costs were assumed to be 46% and 5% of those for a serious crash, respectively (see Atkins, 1981 and Guria, 1991).
• Annual budgeted police resources for crash attendance and investigation were obtained from NZ Transport Agency’s National Land Transport Programme. 
• Annual data on convictions and sentencing details were obtained from the Ministry of Justice. The costs of imprisonment for driving causing death and injury (excluding fixed costs as they are preventative costs) were attributed to fatal and serious crashes only.
• The average legal costs per injury were estimated by equating the total legal cost of each injury crash type to that for all injuries caused by those crashes.

(v) Property damage cost

• The average property damage costs by crash type and area were based on those estimated in Guria (1995) and were updated for price changes using the consumer price index under the vehicle servicing and repairs category.
• The average property damage cost per injury was obtained by equating the total property damage cost of each injury crash type to that for all injuries caused by those crashes.

A2.2 Regional average social cost by year

Historical regional estimates of average social costs per reported crash and per reported injury, by severity and area, using year-specific crash and injury conversion factors are incorporated into the Ministry’s Crash Analysis System. These estimates are available upon request. 



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