Accident Management Costs Trend Upward
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Accident management costs are rising due to the cost of replacing electronics, increased parts prices, new safety devices, and increased cost of materials, such as steel and plastic. While repair costs are increasing, fleets are resorting to new ways to control those costs and are keeping a tight reign on repair expenses.
“The two most prevalent overall trends in our industry are expanding repair parameters to reduce repair costs, and bundling accident management with the company’s driver safety program,” said Vincent Brigidi, director of commercial operations, CEI.
“Costs are definitely escalating. Electronics are out of control. Vehicles are becoming increasingly sophisticated, with 10 to 15 different computers on a car, for things such as engine control, transmission control, the supplemental restraint system, fuel management system, etc. When they’re affected, the more complicated and expensive the repairs become,” said Greg Neuman, quality control supervisor, CEI.
More vehicles are built with high-strength, low-alloy steel, designed to crumple around the passenger compartment in a collision. “As a result, the interior panels that previously could be repaired often no longer can be and must be replaced, which is more expensive,” added Neuman.
Increasingly, aluminum and fiberglass are being used in vehicle parts. These lighter-weight, more fuel-efficient materials are more expensive to repair and must be replaced more often than steel parts. Aluminum is used for exterior parts and internally for such components as engine blocks, transmission cases, and structural supports. However, aluminum is brittle and lacks the material memory of steel.
“We’re seeing more fiberglass in the hoods of vans and SUVs,” said Neuman. “Parts costs are rising. The price of steel and fuel for delivery is rising. Parts manufacturers and distributors are passing along these costs.”
With oil prices continually climbing, companies are being forced to raise prices and institute surcharges, passing on business cost increases to customers.
“We pay for it in manufacturing, shipping, travel, food, etc. The sad part in big business, when consumers are hoping for price reductions, corporations believe we have no choice. Therefore, price increases will stay until new competition forces price reductions,” said Bob Martines, president/CEO, Corporate Claims Management, Inc. (CCM).
“From my perspective, expenditures are flat. Our average severity in 2007 was $1,907 versus $1,870 in 2006, up less than 2 percent year-over-year,” said John Wolford, senior manager of provider and network services, CEI.
Hybrids are more expensive to repair, and CEI now authorizes hundreds of hybrid vehicle repairs compared to few, if any, three years ago. An additional $1,000-$5,000 in expense is standard for hybrid vehicle repair for similar-incident repairs on traditional gas-powered vehicles.
Eliot Bensel, director, vehicle accident services for PHH Arval reports, “Our statistics show bent metal costs increased by 2 percent from 2006-2007.” The increase was primarily driven by new technologies built into today’s cars that cost more to repair.
Bensel noted rising parts expense. “Cost of parts continues to escalate due to the increase in technology that trickles down to the basic fleet vehicle, such as HID headlights and supplemental restraint systems, including airbags and occupant safety devices,” he said.
Additionally, specialized repair procedures to return vehicles to pre-loss condition continue to drive costs upward.
“We’re also seeing more component replacement rather than repair. That’s partly for safety reasons, but also because manufacturers are simply not making as many component parts available for repairs forcing increased assemble replacement,” said Bensel.
“The most recent studies clearly show collisions and severe evasive actions (near misses) are strongly attributable to driver distractions and inattentiveness,” said David Vance, director of safety services, Fleet Response.
“Upgraded vehicular technologies for better handling and evasive controls have evidenced improvement in the near misses (vehicle versus vehicle), but the ‘ran off the road,’ ‘rollover,’ and ‘struck fixed/stationary object’ incidents are undoubtedly increasing. If you or I can be ‘distracted’ by watching other drivers perform their handling of vehicles, we are also subject to potential accidents,” said Vance.
Crash incidents occurring on personal time for fleets that permit personal use have also risen. Driving this uptick may be increasing driver use of the company vehicle and fuel program during a time of record prices at the pump, according to Brigidi.
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