Introduction to Fire Safety Management

1.3.2 Financial reasons (economic costs)
It is widely accepted and understood that safety events 
(accidents, incidents, fi res, environmental damage, etc.) 
cost money. The fi nancial costs to an organisation fol-
lowing a fi re are substantial. There is a perception that 
the majority of such costs are insurable; however, as can 
be seen from the research undertaken on behalf of the 
HSE, 
The Cost of Accidents at Work
, there are numer-
ous areas which are not covered by insurance.
Financial surveys undertaken on behalf of the 
insurance organisations identify clearly the cost of fi res 
to the British economy, details of which are shown in the 
graph in Figure 1.3.
As can be seen from the graph the estimated 
fi nancial losses attributed to fi re are based upon those 
Figure 1.2
The human cost of fi re
Figure 1.3
Graph detailing estimated fi re losses
0
10
20
30
40
50
60
70
80
90
Estimated loss £M
Estimated fire losses in £M for the year 2004–2005
Retail
Local/National Gov.
Education
Hospitality
Food & Drink Industry
Plastics industry
Dwelling
Unoccupied building
Wholesale
Engineering
Chemical industry
Community centre
Entertainment and leisure industry
Warehouse
Timber and furniture industry
Transport
Sport and recreation
Agricultural industry
Construction industry
Office
Motor trade
Library
Glass industry
Waste and recycling
Metal industry

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Introduction to Fire Safety Management
4
causing losses in excess of £250 000. There are many 
fi res falling outside the scope of the survey that result 
in an organisation failing to recover, particularly those 
relating to small to medium enterprises (SMEs).
These refl ect the costs to insurers (claims settle-
ment) but do not, however, take into account a wide 
range of non-insurable costs. It is also often the case 
in industry now that organisations underwrite their own 
losses, particularly in relation to fi re and thus are respon-
sible for fi nding the fi nancial sums to cover claims and 
losses which are often considerable amounts.
Regardless of whether people are injured or not, 
there will be a fi nancial cost to organisations. The 
Accident Prevention Advisory Unit (APAU) of the Health 
and Safety Executive (HSE) has carried out extensive 
research into the cost of accidents at work, the results 
of which are summarised in the publication 
The Cost of 
Accidents at Work
(HS(G)96).
Some accident costs are obvious, e.g. compensa-
tion payments, property damage, damaged product, 
sick pay, etc. These costs are referred to in HS(G)96 as 
the direct costs.
The indirect costs of accidents are not so obvious, 
e.g. replacement staff, investigation costs, poor publi city. 
In addition, many of the direct and indirect costs are not 
recoverable as insured losses.
The relationship between insured and uninsured 
costs of accidents is highlighted in HS(G)96 where for 
every £1 paid in insurance premiums, the average non-
recoverable costs were about 10 times the amount paid 
in premiums. The losses from day-to-day accidents 
range from 8 to 36 times the amount paid in premiums.
For most organisations, the cost of insurance 
premiums can be compared to the tip of an iceberg with 
the majority of the costs (uninsured and non-recoverable) 
lurking beneath the water line.