How Costly Are Motor Vehicle Accidents?

by Staff | June 6th, 2014

What do motor vehicle accidents cost annually?  According to the U.S. Department of Transportation, the price tag in 2010 was $1.1 trillion.  Who pays the cost?  Is it the victim?  The insurance company?  The taxpayers?  And what makes up the price tag?

Last month The National Highway Traffic Safety Administration (NHTSA) released a comprehensive study of the 2010 annual cost of motor vehicle accidents (MVAs).  The purpose of the study was to place the losses in perspective and provide information to government and private sector so that programs can be created or refined to reduce and/or prevent these losses.  In 2010, 32,999 people were killed, 3.9 million injured and 24 million vehicles were damaged in MVAs.  The study revealed that there are two types of costs:  economic and societal.  Economic costs were largely considered items such as lost productivity, medical expenses, legal and court costs, emergency services and property damage.  Societal costs are essentially the cost of resources that are or would be required to restore crash victims to their pre-crash physical and financial status, to the extent possible.  In cases of serious injury or death, where tangible costs fail to capture the intangible value of the lost quality of life, the NHTSA placed a value on the intangibles by using studies that examined the willingness of consumers to pay to avoid the injury or death.  The study concluded that in 2010, the economic cost of MVAs in the United States totaled $277 billion.  This amount is close to 2% of the U.S. Gross Domestic Product for all of 2010.  Put another way, the 2010 economic cost of MVAs was more than the annual 2010 revenues of Ford and GM combined.  But the 2010 data makes clear that the cost of societal harm from MVAs is far greater:  $871 billion annually.  By comparison, in 2010 the world’s largest retailer, Walmart, had annual revenue of $408 billion.

What behavior accounts for the costs?  Alcohol accounted for $59 billion of all economic costs.  Speeding accounted for $59 billion, failure to buckle up $14 billion in preventable injuries and distracted drivers $46 billion.  The comprehensive societal cost, including lost quality of life, fatality, critically injured survivors, was broken down into alcohol involved crashes costing $242 billion, speed costing $210 billion, distracted drivers costing $129 billion and seat belts costing $349 billion.  The study showed that over the last 36 years, seat belts had prevented over $8 trillion in societal harm.  The lifetime economic cost to society for each fatality is $1.4 million.  Over 90% of this figure is attributable to lost productivity, both workplace and home, as well as legal costs.  Critically injured survivors cost $1.1 million on average with medical expenses and lost productivity accounting for 82% of the amount.  Total property damage for fatal, injury and property damage only MVAs amounted to $76 billion.  The study even went so far as to calculate the cost of congestion, travel delays, added fuel and environmental impacts of an accident scene at $28 billion since roadways may need closing, requiring traffic to be re-routed and local resources to be expended.

So who, or what, pays the more than $1 trillion in losses due to MVAs?  The taxpayer paid approximately $24 billion, roughly 9% of the cost.  Private insurance paid 52% and 25% was paid directly by the injured party.  What behavior can be attributed to the economic losses?  The real answer is all of society pays a heavy price.  Victims, families, employers, medical providers, all of society is affected in some way by the massive annual cost associated with MVAs.  Medical care gets more costly and unaffordable, resulting in the public making the payment, insurance premiums escalate affecting the ability to purchase appropriate coverage, employers lose productive workers, short or long term disability causes immediate economic distress, and the physical and emotional impact of a lifetime of pain, disfigurement and disability greatly impacts one’s life expectancy.

Authored by Attorney Ellen M. McCarthy.