Iceberg Theory

Iceberg theory is a visual illustration of the 10^th axiom proposed by Heinrich, which compares the direct cost and indirect cost caused by an accident. Based on iceberg theory, the direct insured cost is only “the tip of the iceberg” out of the indirect “out of pocket” cost. The indirect cost of accidents can be as much as 8 to 36 times greater than the direct cost of injury compensation to the organization. Indirect costs such as time and cost to spend on investigation process and, loss of skilled workers, hiring and re-training of new workers, repair cost of damage equipment, low employee morale and many hidden cost makes risk control even more important at workplace. If an organization’s management refused to invest in safety, they might not experience accident before.