The report, `Valuation of the human cost factor of traffic accidents' (Ministry of Transport and Communications, Publication B 9/99), concluded that the current methods used in Finland for costing accidents are not theoretically completely valid and should be revised, along with estimating new respective unit values. Individual willingness to pay should be applied in order to capture the true nature of welfare impacts induced by accident risks and to quantify the lost quality of life in monetary units. Only those values that reflect subjective risk preferences represent the welfare consequences of accidents in an appropriate manner. The Finnish accident costing system has been re-examined in this report, and a set of new unit costs proposed accordingly. For presenting the arguments behind the adopted method for costing risk values, a review of the valuation methodology and its economic welfare foundations has been presented. The material accident costs have been adjusted according to the 1987 inventory only by a price index to current day values. The production losses have been costed according to the theoretically correct net of personal consumption approach, based on 1998 data on Finnish national accounting. The other major change in the costing structure concerns the approach to valuing lost quality of life induced by personal injuries. As Finnish empirical risk value studies do not yet exist and there has been no time for conducting such a survey, the method of value transfer has been applied. Value transfers are commonly used in order to reduce the cost of arduous and time-consuming studies and to obtain information for decision-making with less research effort.
Abstract