Evaluating Crime's Cost and ROI of Surveillance Systems

By John Honovich, Published Nov 01, 2010, 08:00pm EDT

Beyond cost, reducing crime is a major factor in generating Return on Investment from the purchase of a surveillance or security system. Reducing crime rate or eliminating a few crimes can often justify the entire purchase of a surveillance system. However, a key issue is determining what the value of a crime is.

A recent academic study aims to quantify, in monetary terms, the cost of different crime categories. Published by researchers from Iowa State University, this study [link no longer available] is getting significant mainstream press and is likely to become a commonly cited reference (see a summarization in the press, a discussion in a popular media outlet and the original 13 page research paper [link no longer available]).

Let's start with the 'big numbers' claimed by the researchers (on pages 7 and 8 of the study):

  • Murder, average cost per: ~$23.9 Million USD
  • Rape, average cost per: ~$95,000 USD
  • Armed Robbery, average cost per: ~$254,000 USD
  • Aggregated Assault, average cost per: ~$49,000 USD
  • Burglary, average cost per: ~$14,000 USD

If you sell surveillance systems, these numbers look attractive (primarily because they are pretty high). Stopping one murder pays for almost any sized surveillance system. Even stopping a single burglary pays for most 16 camera systems.

There's a Problem

This study makes very interesting and potentially controversial assumptions. In addition to adding up direct costs like property loss and justice system costs (police, trials, etc.), it factor in loss productivity and an economic factor called 'willingness to pay'.

From the perspective of most security managers, willingness to pay is extraneous and difficult to justify. Willingness to pay is calculated by asking people how much they would pay not to be murder, raped, etc.? Critics argue that this is a double calculation (see a debate in Slate's online discussion). More importantly, for real world security use, this is not a hard cost that is being reduced. It's a much more intangible 'quality of life' benefit that is rarely accepted in the world of security systems.

Factoring Out Willingness to Pay

Let's re-run the researcher's numbers without willingness to pay:

  • Burglary: ~$1,800 (previously ~$14,000)
  • Aggravated Assault: ~$19,000 (previously ~$49,000)
  • Armed Robbery: ~$34,000 (previously ~$245,000)
  • Rape: ~$31,000 (previously ~$94,000)
  • Murder: ~$7.2 Million (previously ~$23.9 Million)

The 'cost' drops about 70-90% when the willingness to pay figure is removed.

Using these Numbers

The best fit for using these numbers to justify security systems is clearly governments (city wide deployments, publicly owned transit authorities, military, etc.). In these projects, the owner (governments) absorb all costs and can best justify these higher cost estimates.

In the private sector, we think reasonable security managers will find these estimates to over-value the cost of crime (as they include costs not born by the private entity).

Good numbers for estimating security losses are hard to come by. These numbers are useful but should be treated with caution and noted concerns for applicability.

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