Evaluating the Australian Accident Management Landscape
Accident management is a term/service that has gained growing appeal since the early 1990s, when it was pioneered by Phil Harrowell of CFC and Adrian Stone of SurePlan, being used to cover a service(s) provided following the reporting of a motor vehicle incident, and sold as a cost effective and efficient means for speeding up the processing of a motor vehicle repair and the settling of a claim. The service has also given rise to a host of supporting services covering, rental vehicle provision; third party claims management, detailed risk analysis and mitigation services.
The term accident management when applied to a motor vehicle incident is in many ways a misnomer, with the dictionary meaning for “accident” being an event by chance, the way things happen without any planning, apparent cause, or deliberate intent. When it comes to a motor vehicle incident there is nearly always an apparent cause and therefore should not be referred to as an accident. Motor vehicle incidents are an event where there is a predetermined reason for it occurring, hardly an accident, but getting public perception to change from accident to incident; I would have more chance in winning Tatts!
Over the past decade Australian business has become more relaxed when it comes to getting an external party to undertake functions it may have previously regarded as only able to be done through an underwriter or in-house, but as many tasks become more demanding in terms of expectations and managing, increasingly businesses are looking to have an external party undertake and deliver quantifiable benefits at a saving.
This change has seen the traditions like tea trolleys, traditional HR and accounting functions, service workshops, and the ownership and management of a motor vehicle fleet being outsourced either entirely or piecemeal.
The spin off services like the finance and management of a business’ motor vehicle fleet has provided the successful operatives with the opportunity to add another layer of outsourcing in accident claims management and insurance cover and frequently not from the same source.
The major players in this facilitation are the leasing and fleet management companies (FMOs) who predominantly outsource these services to another party, whilst marketing as their “own” service the supplier is frequently a specialist who flies under the radar in supporting the service.
In the case of accident claims management, approximately 250,000 motor vehicles managed by leasing and fleet management companies in Australia and New Zealand are in turn outsourced to independents to manage where a claim occurs following a motor vehicle incident.
In many ways this is a case of outsourcing the outsource, with a client giving the management of its fleet, including its accidents, to another party, which is frequently on the basis of a partnership that has been in place for a number of years. This is not a bad approach if the party managing the claims has the necessary expertise and skill set to add value to both relationships.
But, Australian business does not always work through an intermediary to have its motor claims managed where they self insure or have an aggregate, they go direct to an independent provider.
But, why do businesses either directly or through a facilitator get another party to manage their motor vehicle incident claims? Businesses and government departments with as few as 25 motor vehicles to those with in excess of 20,000 choose to have their claims managed by a third party where they either self-insure or have an excess in place.
The rationale behind this decision is driven by a number of factors. But, what is most intriguing is that a business will frequently place their underwriting requirements with one insurer and the management of any future incident claims with an independent claims management specialist; in Australia and New Zealand the writer puts the number of vehicles who have an outsourced claims management arrangement at just under 500,000 units, including the number outsourced by the FMOs.
The extent to which a business will outsource its claims management will be dictated by the degree of its insurance cover, for fleets with a low excess in place the extent of cover may only extend to claim lodgment and analysis, with the level of service take-up expanding as the excess increases to a full service outsourcing where an aggregate is in place or a fleet elects to self insure.
- The appeal of outsourcing will draw primarily on:
- The provision of enhanced services and process.
- A reduction in associated costs and resources.
- Improved turn around and reporting.
- Indicator for applying appropriate mitigation services.
It is important that when going to the market that you have a first hand knowledge about your own processes and costs, relating to the management of motor vehicle incident claims, against which potential suitors for your business can use as the basis for outlining the savings they will be able to deliver. If they cannot deliver a 20-percent or better reduction in costs, including time savings, then look at your own processes and what you can do to achieve a 20-percent saving on how you currently do it. Review your processes and supplier arrangements you may be surprised on how easy it is to achieve savings in this area.
Possibly the biggest benefit an outsourced arrangement can deliver is in the software that they bring to the party in that it provides a single source for managing and referencing your claims which you may not have been able to access previously. Where such a support is in place it will provide the added benefit of greatly enhanced reporting and analysis. In considering an outsourcing arrangement it is important that you benchmark and review the level of support the suppliers system will provide, its response time, and especially how good its help desk is.
One of the hidden benefits of an outsourced arrangements is that the data your supplier collects allows for some interesting benchmarking of key incident areas, where used correctly it can identify the trends of incidents in your fleet and the causes of these trends and when benchmarked against a larger pool of data provide an indicator of the extent of the improvements you need to achieve.
The reporting and ensuing analysis are worthwhile benefits that you should seek to incorporate into any arrangement that you enter into when outsourcing. If the reporting and analysis provided are of a high enough quality they will give you a ready made road-map on how to reduce your incident rate and costs. The outcome will frequently provide solutions that are neither costly nor difficult to introduce.
The remaining “$64,000” question is how much should be paid for the outsourcing of the management of your incident claims, the cost and degree of the services you need will be determined by the extent of your underwriting cover, from a low excess to one of being fully self-insured. Starting with the lodging of a claim and passing it on to your insurer to one where the full process is undertaken and reported on.
Subject to the degree of service your arrangement will be costed on the basis of the following or a combination of:
- Per vehicle per month, ranging from $3.50 to $8.50 plus GST, for some larger commercials the fee can be higher.
- A per claim fee which may range from $90.00 to $275.00 plus GST.
- A flat monthly fee that can include the claim management requirements and assessing charges. Used by fleets that requires a set figure for budget purposes.
- Where third party recovery is undertaken, a separate fee may be charged generally within a 5-15 percent of the gross monies recovered, will either be a percentage or a set dollar amount.
- The charging for the processing of individual invoices related to the incident that you require the supplier to pay on your behalf.
In your discussions with a potential supplier the above options will be outlined very clearly as a key part of their proposal with room for negotiating on the proposed fee or their blending. As part of this negotiation it is worth knowing the sources that your potential supplier may be deriving other income from the management of your business, as is the case with many service businesses a significant proportion of their income may fly legally under the radar, but its worth knowing the extent of it as it can assist in your negotiations.
- Where the supplier allocates your vehicle to a repairer in his network, do they receive a rebate, factor the repair debt or receive a system service fee?
- Is the assessing undertaken in-house or by an external provider and a margin added to the fee charged?
- Is a margin received where a tow booking is made?
- Where a rental booking is made is a booking fee paid?
- Where your provider undertakes the payment of invoices on your behalf is a fee payable?
The provider of the service may see these income streams as off-setting the competitive management fee he is charging you.
Being aware and factoring the above into your discussions will ensure no surprises down the track and a mutual win-win.
For an outsourcing arrangement of your incidents to be a real winner, it needs to be seen as the means for not only managing your claims more efficiently and cost effective, but you need to manage the supplier in ensuring you get the best results from them, it’s not the type of relationship that you can put in place and then walk away from, ensure that they are accountable on what they undertake to deliver and especially save you.
The Australian marketplace has a number of very credible accident claims management providers, in seeking out their services it should be done on the basis of knowing what you want and what you will get from the relationship, and by measuring the savings you will achieve when benchmarked against your current practice.
Editor's note: Tony Robinson is fleet risk manager for AB Phillips Pty Ltd. in Moorabbin, Victoria, Australia.