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Economic Downturn Influences Fleet Accident Management

Economic uncertainty, fewer cosmetic repairs, and a decline in rental costs are some factors that influenced 2009 accident management costs.

June 2010, by Lauren Fletcher - Also by this author

Click here for a PDF of the full article, including charts.

Overall, in 2009, an average of 18-23 percent of fleet vehicles were involved in accidents in 2009, on par with 2007 (20.5 percent) and 2008 (19 percent) figures.

According to Bob Martines, president and CEO for Corporate Claims Management (CCM), the percentage of accidents varies dramatically due to factors such as the type of company, age of drivers, years of service, areas traveled, and miles driven.

The impact of repair costs, the economic downturn, and added safety programs on accident management costs is discussed.

Repair Costs Impact Accident Management

In 2009, the Cleveland-based fleet and risk management company Fleet Response saw overall vehicle repair costs decrease slightly from 2008 numbers. "Several factors contributed to the modest decline in repair costs," explained Stuart Braun, adjuster and maintenance supervisor for Fleet Response. "Clients are declining certain cosmetic repairs and requiring use of more alternative parts, such as used (LKQ), reconditioned, or aftermarket."  Rental costs have also declined, which Braun noted is "due to a decreased cycle time of repairs."

Overall repair costs at Ivyland, Pa.-based CCM also dropped slightly. "I believe the drop was minimized because parts prices did increase from the manufacturer's side, which affected the cost to collision shops buying parts. Paying more for the parts drove costs up slightly," said Martines of CCM.

According to Martines, contained cost increases can be attributed to an increased use of used and aftermarket parts, plus willingness of shops to do whatever was necessary to keep a job, rather than total a vehicle.

"Severities among our accident management clients varied according to vehicle mix and repair parameters," said John Wolford, senior manager of provider network services at CEI.  "For some, severities declined, while for others they remained flat or increased slightly."  CEI officials said the results were a combination of offsetting trends, some of which are driving repair costs higher, while others pushed the amount fleets spent on repairs lower.

Wolford explained that getting damaged vehicles back on the road is getting pricier because they're built to be safer and more fuel efficient. Greg Neuman, CEI quality control supervisor said, "today's vehicles have more computer hardware, more light-weight parts made of aluminum and plastic, and ever-increasing amount of sophisticated safety equipment, all of which is creating fewer opportunities to repair parts." This changing content is also tending to make damage diagnosis more difficult  and time-consuming, resulting in longer cycle time and greater chances for supplements.  "There's more and more damage that estimators can't detected in simple inspections and doesn't become evident until vehicle tear-down," Wolford noted.

On the other hand, 2009 was marked by  economic trends and increasingly common fleet tactics CEI officials said were holding down the amount fleets actually spent fixing vehicleds.  "Avoiding low-dollar repairs that don't affect vehicle or driver safety is a trend that intensified in 2009," Neuman said.  "We saw quite a few fleets doing this in 2008, but the number grew last year and now almost all fleets are."

Some fleets also shrank in size in 2008, Wolford said.  "A number of fleets had fewer drivers on the road, and because of that had fewer accidents," he noted.  This resulted in some fleets having surplus vehicles, which enabled them to swap them for damaged units and postpone repairs.  "This year, though, some fleets now have fewer surplus vehicles on hand, and we're seeing them doing more repairs than in 2009."

Pressure on fleet finances were also softened last year by rising salvage values, according to  Chris Villella, CEI senior manager for loss recovery and insurance services. "We saw average salvage value rise by nearly 90 percent last year over 2008," Villella said.
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