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Rethinking Road Safety – Investing to Save People’s Lives

Every few months, I go to pay condolences to families who lost their loved ones in traffic accidents or visit an acquaintance in hospital due to an injury they suffered in a car crash.

I am pretty sure I am not alone in that. Montenegro is one of the countries with the highest number of persons killed in traffic accidents in Europe. In 2016 alone, there were more than 5,200 traffic accidents, with 65 persons killed and another 2,500 lightly or seriously injured.

Although we all hate putting a price tag on a human life, the economic case for preventing accidents is just as important as the moral one. Studies show that every human life lost in a traffic accident costs our country about half a million EUR.

This includes legal and medical expenses, caring for the disabled, organizing funerals, but also indirect costs such as loss of income, social payments and tax revenue for society at large. It's clear that even a moderate investment in Montenegrin road safety would make a difference.

At UNDP in Montenegro, we sat down and asked ourselves how we can help improve road safety, saving both lives and money. Can we reframe road safety as an investment rather than a cost? That's how we decided to try and test an innovative model - Social Impact Bond (SIB) – as a way of raising money for road safety reforms.

Put simply, a Social Impact Bond is a contract between a government and investors that funds positive results, such as Pay for Success, a model that directs government resources toward social programmes that perform well.

If we think in those terms, fewer people getting killed or injured on the road means the government saves money, and investors get a return.

In the event the outcome doesn't improve, the government does not pay dividends. But nothing is lost: we get to understand where and why accidents happen and what types of interventions – such as improving roads, vehicles or drivers' behaviors - will make a significant difference.

Either way, it's a win-win.

In using SIBs, our intention is to nudge the government into preventing accidents instead of merely treating them.

When we allow the government to pay for results instead of services, the financial risk is transferred to investors. The government only pays for positive outcomes and the funds can instead be integrated in the budgeting.

Here is what our next steps look like:

  • Conduct a road safety assessment to look into the main causes of accidents;
  • Check what legal frameworks are in place in Montenegro for setting up SIBs;
  • Look at the math and calculate costs and benefits.

We are excited to embark on this challenging journey – and become pioneers in bringing SIB to Montenegro.

We are aware that the stakes are high, but we also know that if we succeed it will benefit practically every family in our country. This could be a life-changing action for hundreds of human lives in the future. Wish us luck!

Author: Irena Jokić, Programme Associate, UNDP Montenegro

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Comments 1

Guest - Anon on Friday, 06 July 2018 16:56

Tom Davies at Social Finance UK has been looking at something similar. Worth getting in touch to compare notes.

Tom Davies at Social Finance UK has been looking at something similar. Worth getting in touch to compare notes.
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Wednesday, 26 January 2022