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THE RATIO 4 TO 1
H.W.Henrich placed the Indirect cost as an average of 4 times the direct cost.
►This was the origin of much discussed and controversial 4 to 1 ratio.
►Some studies yielded ratios ranging from 8 to 1 to 1 to 1 but in general they supported Henrich’s findings.
►After Henrich’s research of 4 to 1 ratio, Frank E Bird (Jr.) accepted the iceberg principle of hidden costs, dividing them into two categories:
1.Uninsured costs of property damage which can be easily quantified
2.Uninsured miscellaneous costs which are difficult to quantify.
PART A: Insured costs
1.Medical
2.Compensation
PART B: Uninsured costs
1.Building damage
2.Tool and equipment damage
3.Product and material damage
4.Production delays and interruptions
5.Many items such as hiring and training, investigation time etc.
