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Track the cost of risk to uncover rewards

There is a price to pay for risk management. Every insurance premium or deductible will illustrate that point. But many fleets and owner/operators might be surprised to learn just how much the cost of risk extends beyond insurance claims alone.


There is a price to pay for risk management. Every insurance premium or deductible will illustrate that point. But many fleets and owner/operators might be surprised to learn just how much the cost of risk extends beyond insurance claims alone.

Look no further than dented wheels, a barn door blown off a trailer’s hinge, or any of the other collision-related damage which can typically be repaired for less than the price of an insurance deductible. Individually, they might be dismissed as minor problems and absorbed into overall maintenance budgets. Collectively, they can be part of a more troubling story and an ever-escalating financial loss.

It supports the case for a closer look at the numbers.

The cost of replacement components and a mechanic’s time are just the beginning.

Delays linked to these “little” collisions might generate fines for late shipments or erode goodwill, potentially convincing a shipper that they would be better served by another carrier. At best, the fleet will lose the revenue that would otherwise be made by a moving truck.

Even purely cosmetic damage can exact a financial toll. A skilled driver who takes pride in their equipment might decide to look elsewhere for a job, adding to a fleet’s overall recruiting and retention costs.

To compound matters, the smaller claims tend to be a sign of bigger problems to come. There is a saying in the insurance industry that “frequency leads to severity.”

Put another way, each minor collision increases the likelihood of a bigger one in the future.

This time a poorly adjusted mirror might lead a driver into a barrier and cause $500 in damage; the next time, the same sequence of events could lead the driver into a bystander. The employees who make such mistakes are also more prone to costly single-vehicle rollovers, jackknifes, and rear-end or intersection collisions.

It is why the Total Cost of Risk (TCoR) is typically set at four to five times the known costs including insurance premiums, out-of-pocket expenses such as the minor repairs, internal administration costs of risk management teams, and third-party support from sources such as lawyers.

With each of these costs paid directly from a company’s bottom line, this is hardly a comforting thought in a business where fleets typically make pennies on the dollar. Still, it is possible to control the losses by tracking even the smallest repair – and taking a broader look at the numbers rather than fixing and forgetting any damage.

Every figure can help to tell a story. It is a matter of finding the underlying factors that the individual losses share in common.

Crashes which always seem to involve a particular customer’s freight, for example, can draw attention to exceedingly tight schedules or other unusual demands. These might be addressed by refining dispatching procedures or working with sales teams to revise the contracts.

Meanwhile, a troubling increase in backing collisions could focus safety managers on the layout of a fleet yard or the tight route into a customer’s loading dock.

These issues can often be solved by considering different routes into a property, switching to shorter trailer lengths, or offering drivers added training in backing techniques and mirror adjustments.

Common threads might also be connecting specific groups of drivers. After acquiring another business, for example, a fleet might discover that its newest drivers are more prone to certain types of collisions and need some type of remedial training. Maybe they are unfamiliar with the new routes or equipment they are using.

Quite simply, any emerging trend will give fleet managers the insight to refine policies and procedures; assign training budgets where they will make the biggest difference; or make the business case for vehicle options such as larger mirrors, electronic blind spot detectors, and other purpose-built technology.

The benefits which emerge are not limited to lower collision costs or controlled insurance premiums, either.

Improved ratings through carrier profiles such as Ontario’s Commercial Vehicle Operator’s Registration (CVOR) or the US-based Compliance, Safety, Accountability (CSA) score help to prove that trucks will face fewer delays, which will be positive news for customers and drivers alike. Administration teams who spend hours investigating or filing insurance claims will also have the chance to turn their attention to other tasks.

Best of all, the fleet owners and managers who understand the true costs will be equipped to make informed business decisions about risk-related investments. That will lead to many lasting rewards.


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