Cost of road accident fatalities to the economy

The purpose of this manuscript is to study the effect of traffic accidents in the income generating capacity of the affected individuals. Such an event also has an impact on their contribution back to the society and the state.  Therefore the value and/ or cost of a human life in case of a traffic accident needs to be evaluated. The problem we will address – and purely in this term we use the words value and cost - is the quantification in monetary terms of the loss of a human life.

We will try to quantify the involved cost due to traffic accidents to affected citizens. We focus on the impact such accidents can have on the individuals of interest; this can be death, permanent disability, temporary disability, hospitalization or rehab. We emphasize initially on the loss of life (death).

To estimate the cost we will need to know the contribution of each and every individual via his or her employment or other earnings; hence his or her income generating capacity for the remaining of his or her life would the incident have not happened.

Then we will need to find the “present value” of such income, adjusted for the probability of such an event (death, permanent or temporary disability, etc) happening.

This resembles the calculation of a pure insurance premium. The economic impact of the loss of a human life is the objective of insurance. We will thus employ insurance-based methods to achieve our goal. We will mimic the calculation of the burning cost (excess losses divided by total subject premium) of an insurance policy that provides coverage for the risk under investigation. To better explain the methodology described, we will first limit ourselves to the case of death due to traffic accident (as mentioned above).

 It is of interest to the state and the relatives of the deceased to recuperate/ recover as much as possible of this lost income. We will also indicate potential routes to do so.