WHITE PAPER
Saving Millions by Preventing
Accidents and Reducing Net
Repair Expenses
By Bob Glose, CEI senior director of operations
F
or years, under pressure from senior management, the fleet world has been
scrambling to cut expenses. To their credit, fleet managers have responded
to the challenge in a variety of ways, from “rightsizing” to extending the
service life of their vehicles and making their fleets more fuel-efficient.
Another approach, however, has yet to be fully exploited by the fleet industry
at large: reducing the costs associated with accidents. Now, with the advent of
telematics and in-vehicle crash avoidance technology, fleets are hoping to reduce
operating costs even further by preventing accidents. While promising, the full
potential of these nascent technologies and their cost-benefit ratio has yet to be
determined in practice.
Fortunately, though, there are proven methods already in place that can achieve
dramatic reductions in the cost of accidents. Here, we’ll cover four: reducing the
cost of repairs, reducing replacement vehicle expenses, increasing recoveries from
third-party drivers, and preventing accidents. Throughout, we’ll be referring to our
own experience to illustrate the potential savings from each method.
Reducing Repair Costs
At CEI, we’ve found it possible to reduce fleet repair costs by between
8% and 12% year. For fleets with a 25% accident rate, and at an average
repair cost of $2,400, that could mean annual savings of between $48,000
and $72,000 a year for every 1,000
vehicles, and well into six figures for
larger fleets.
How is that possible? A few service
providers focused on accident
management, like CEI, have a full
complement of licensed physical
damage appraisers who scrub every
repair shop estimate for savings
on parts and labor. Experienced
experts in collision repair, who have had successful careers as body shop
technicians, estimators and managers or insurance industry appraisers, can
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assess how extensive damage may be, even in places not immediately visible
in images of damaged vehicles. They are also adept at recommending the
most cost-effective way to return these vehicles safely to the road.
For example, they can judge when parts can be repaired instead of replaced
at a higher cost; when an OEM part must be used, or when a less-expensive
certified after-market or used part can take its place. They look for
opportunities to complete two or more repairs with just one removal step,
to save redundant labor charges, and to use less-expensive paintless dent
repair rather than traditional methods. They also know when a repair that
only affects the vehicle’s appearance can be postponed (as well as when
damage that only appears to be cosmetic ought to be repaired).
Cutting Rental Expenses
Money spent on temporary replacement rental vehicles is often overlooked
for savings potential. At roughly $40 a day, the difference between a 10-day
repair cycle time and 12 days is $80,
and between 10 and 20 days is $400;
multiplied over hundreds of repairs,
the excess expense easily reaches into
the tens of thousands of dollars. When
those extra days are due to a complex
repair or parts being in short supply,
the cost is justified, but not when
they’re the result of lapses that could
have been avoided.
The key to keeping rental costs low is to keep cycle time – the time it takes
for a shop to complete repairs – short. Shops should be held accountable
to meeting agreed-upon repair schedules, which comes only with close
monitoring. This best practice can be difficult to accomplish for fleets
with limited human resources; but it’s an accident management service
provider’s business to bring the necessary resources to bear on this effort.
Monitoring can only work, however, when the repair customer has leverage
over the shop, and leverage is limited unless the shop receives meaningful
volume from the fleet. Fleet accident management companies often have
this leverage because, representing a large number of fleets, they’re able to
provide volume repeat business that shops rely upon.
Fleets themselves sometimes contribute to unnecessarily longer cycle times
when they delay authorizing repairs. Large fleets, where repair decisions
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are shared by a headquarters and local fleet manager, can run into this
problem. In these cases, it’s important for all players to remember that
every extra day it takes to authorize repairs is costly, and potentially by
more than just one day of extra rental for each day of delay. Shops can be
counted on to reserve a repair slot only so long before they put in another
customer’s vehicle. In this case, it may be several more days before the
fleet’s repairs can begin.
Increased loss recoveries
It takes time and effort, but effective recovery of repair and other related
expenses from third-party drivers significantly reduces the net cost of fleet
accidents. Fleets that collect every dollar they’re due from accidents caused
by non-fleet drivers can offset repair expenses by as much as 20% to 25%,
according to CEI statistics. For a 1,000-vehicle fleet with a 25% annual
accident rate, that can mean some $150,000 in recovered funds.
Unfortunately, it’s relatively rare that a fleet is sufficiently staffed with
personnel trained and skilled at loss recovery, which is a semi-professional,
paralegal process. The laws on whether and how much you can recover
from a third-party driver vary from state to state, and unless the demand
for recoveries is properly prepared, documented, negotiated and expedited,
fleets can be – and often are – frustrated in their attempts to recover what
they are rightfully due. The best accident management service providers,
on the other hand, operate departments of loss recovery specialists,
experienced in negotiating their way through the laws and procedures, and
trained in ways to overcome obstacles.
Typical performance we have achieved may serve as basis of comparison
for fleets that pursue damages with their own internal resources: recovery
potential is found in one out of every four claims. Coverage recovery is
95% of the funds we seek, and it’s achieved, on average, in less than 60
days after we launch our demands. If a fleet isn’t achieving that kind of
performance, money is being left on the table.
Preventing Accidents
Taking into consideration the cost of repairs alone, preventing an accident
saves more money than spending less on repairs and recovering damages
for some fraction of annual accidents. The savings are much greater,
however, when you consider the real costs to a fleet sponsor that go
beyond repairs and rentals.
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These so-called “hidden” costs of fleet accidents don’t appear on a fleet’s
books, but are nonetheless real, costing the organization through lost
productivity, medical expenses, workman’s compensation claims, and
administrative expenses. For accidents with serious injury or fatalities, add
in legal costs and liability. The Network of Employers for Transportation
Safety estimates that the sum total of all business costs for the average
accident is nearly $16,600, while for one involving an injury it’s $76,300
and for one involving a fatality more than $504,000.
Sophisticated in-vehicle crash-avoidance technology is designed to
compensate for driver error and, in some cases, take control of the
vehicle to avert an accident. While adoption of this technology is not yet
widespread, driver monitoring and risk assessment systems have already
been proven to prevent fleet accidents and reduce accident rates by as
much as 35%.
These systems work by delivering timely and widely publicized
consequences for poor driving behavior. They create files for every fleet
driver that contain data that describes their driving performance; the
sources are, typically, state motor vehicle records (MVRs) and accident
history, but may also include traffic camera violations, information from
toll-free driver reporting services, and incidents of high-g forces and
speeding from telematics systems.
The files are updated as new data is received, and each event is assigned
a point value. Drivers are then sorted into ascending risk categories.
Whenever an event moves them to a higher risk category, they are
immediately sent an email letting them know that their risk status has
changed, are are assigned remedial training, or are subject to other
sanctions. At the same time, depending on the severity of the most recent
event and protocols established in cooperation with the fleet, the fleet
department, the driver’s manager, and the safety, HR and legal departments
are also notified.
The result is a virtual safety committee that meets not monthly, quarterly
or annually and is burdened with paper, but one that harnesses the
power of current information technology. It’s on duty 24/7/365 and
provides actionable data soon after events occur regardless of the driver’s
status within the organization. As a result, knowing that their driving
performance no longer flies under management’s radar, drivers change
their driving behavior for the better, in a phenomenon known as the
“Hawthorne effect.”
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The name derives from an experiment conducted at a Westinghouse
company factory in Hawthorne, Illinois in the late 1920s and early 1930s.
Management wanted to know what kind of lighting had the greatest
positive effect on worker productivity. The experiment showed that all the
different lighting systems tested had an equal and beneficial effect. The
conclusion was that when workers’ performance is closely monitored and
measured, and they know that management expects better performance,
they improve their performance.
Demonstrated savings
The two charts on the following page illustrate what fleets can accomplish by
adopting these cost-reduction methods. The first summarizes the accidentprevention record of a vocational truck fleet with 10,000 vehicles that
implemented our accident prevention program. Starting with an accident
rate of 35.7% (numbers of vehicles in service divided by the number of
accidents per year), after seven years the rate fell to 24.9%, a decline of more
than 30%. The program prevented more than 3,500 accidents, for $9.2 in
avoided repair expenses, and more than $58 million in total costs.
The second chart shows the results that a sales fleet of some 3,000 vehicles
achieved over seven years using all of our company’s cost-saving programs.
Its accident rate declined by 25.2% as 1,341 accidents were prevented. In
addition, the fleet saved more than $762,000 in completed repair costs, and
recovered more than $5 million from at-fault, third-party drivers. In all the
fleet saved an average of $1.3 million a year in repair expenses, while the
company realized an estimated $22.3 million in hidden costs.
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4850 East Street Road
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4850 East Street Road
Suite 200
Trevose, PA 19053
Chart 1
Energy technology and services fleet/ 10,000 vehicles
1000
40.0%
Accident Rate
35.7%
30.0%
30.8%
723
29.1%
25.0%
20.0%
341
15.0%
456
28.7%
490
27.7%
934
900
800
700
26.2%
24.9%
581
600
500
400
300
10.0%
200
5.0%
100
0
0.0%
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2
3
4
5
6
7
Accidents Prevented
35.0%
0
Six-Year Summary
• 3,525 accidents avoided
• $2,600 avg. cost peraccident
• $9.2 million in avoided repairs
• Hidden cost savings: $58.5 million ( = 3,525 avoided accidents X
$16,600 NETS estimated cost per accident)
Chart 2
Sales Fleet/ approximately 2,700 vehicles
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Total
Accident
rate
43.5%
34.9%
37.1%
37.5%
34.8%
37.6%
33.3%
NA
Accidents
Avoided
0
297
210
179
248
163
242
1,341
Avoided
Repair $
$0
$773,024
$546,532
$466,528
$646,037
$424,000
$630,452
$3,486,573
Repair
Savings
$9,750
$118,089
$84,730
$95,218
$131,933
$183,985
$136,517
$760,222
Subro
Recoveries
$924,090
$795,033
$786,607
$644,882
$687,045
$632,154
$559,992
$5,029,803
Savings
Grand Tot.
$933,840
$1,686,443
$1,418,080
$1,206,808
$1,465,263
$1,240,302
$1,327,204
$9,277,939
Seven-Year Highlights
• Accident rate reduced by 25.2%
• 1,341 accidents avoided
• $9.3 million in total fleet savings
• Hidden cost savings: $22.3 million ( = 1,341 avoided accidents X
$16,600 NETS estimated cost per accident)
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Conclusion
Most likely, fleets will always be expected to control and further reduce
costs. Emerging technologies offer the promise of lower accident rates.
Meanwhile, there are proven methods for reducing the costs attendant to
accidents that the fleet industry at large hasn’t yet fully exploited. These
include systems that reduce accidents by changing driver behavior, and
services that save money on repairs and offset annual accident repair
expenses by improving their collecting from at-fault third-party drivers.
Fleets owe it to themselves to consider obtaining these services, which have
the potential for saving them and their organizations millions of dollars.
4850 East Street Road
Suite 200
Trevose, PA 19053
SALES
Kathi Croze
918-296-3298
Luann Dunkerley
215-485-4275
Mike Kotula
404-264-9479
Pete Mitchell
215-485-4315
Sean O’Malley
612-254-5544
DIRECTOR OF SALES
SUPPORT
Ken Latzko
215-485-4245
EDITOR
Mark Boada
215-485-4241
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