Accident Management Costs Rise 6.2 Percent
Illustration by Armie Bautista.
Accident management costs in 2013 were on the rise, increasing by up to 6.2 percent in some cases, over 2012 figures. The rising cost of raw materials, new-vehicle technologies, parts and labor, use of advanced materials, and additional components for parts assemblies have all contributed to an overall increase in cost.
"Parts increases are passed from the manufacturer to the delivering dealer, to repair shops, thus the increases are included in the final repair price," according to Eliot Bensel, director, vehicle accident services and risk and safety for PHH Arval. "In addition, there is the use of advanced materials for weight reduction to improve fuel economy and meet tightening CAFE standards."
Factors Impacting Rising Costs
While there are several factors contributing to the increase in accident management costs, Stuart Braun, adjuster and maintenance manager for Fleet Response agreed that new materials are having a big impact on overall costs.
"The No. 1 impact on accident management costs is the continued introduction of new materials, such as aluminum, magnesium, and carbon fiber," Braun commented. "Many of these new materials limit the repairability of a particular part."
Parts availability is also having a large impact. "If parts are not routinely available, the demand for what parts are available becomes stronger thus suppliers have the luxury of increasing prices without notification to the end user," said Bob Martines, president and CEO for Corporate Claims Management (CCM). "Estimates for repairs are written based on existing prices that day; however, when the parts are delivered, the prevailing price on delivery ultimately affects the end price. Parts costs rarely, if ever, decrease."
Martines also noted the importance of considering recalls and warranty issues.
"Once there is a major recall, the manufacturers need to regroup to take care of the recalls. Available parts go to address new-vehicle production, recalls, and last in line for everyone are the replacement parts for general repairs," Martines noted. "The entire repair process is negatively affected. While no one can prove there is a correlation with recalls and general parts price increases, it is not too difficult to deduce free repairs are paid for elsewhere."
Technology's Growing Impact
Overall, the technology used to make cars and trucks safer and more fuel-efficient is driving repair costs higher, noted Greg Neuman, manager, quality control for The CEI Group.
"Take air bags, for example. More appear in new vehicles every year — in some cars there can be as many as 10. They're expensive to replace when they've deployed, and even when they don't, warning lights that indicate a problem are cumbersome to diagnose," Neuman noted. "We're also seeing an increase in replacement headliner prices, driven by damage from the deployment of side curtain air bags. All this customization and proliferation of electronics (to support air bags and other internal systems) significantly increase diagnostic times. And, time is money. That time is typically charged at mechanical labor rates, which are higher than body repair rates."
Illustration by Armie Bautista.
The addition of alternative-fuel vehicles to fleets has also impacted overall repair costs.
"Hybrids have gone more mainstream. The implication for this from a collision repair standpoint is there are more qualified shops available to repair these vehicles. Though damage repair costs have historically been higher for hybrids, the augmented supply of shops has now leveled out costs accordingly," said Bensel of PHH Arval.
One newer technology impacting costs is hot stamping. "As manufacturers strive to lighten the overall vehicle while improving safety and fuel economy, hot stamping is a newer vehicle technology that is impacting fleet accident management costs," explained Braun of Fleet Response. "The hot stamping process converts low-tensile strength steel to very high-strength steel. This technology is being used on an entry level basis for A and B pillar applications. Because of the high-strength characteristics of the material, the repairability is limited and often needs to be replaced if damaged."
According to Neuman, CEI is also keeping a close eye on the new lightweight structural materials being used in frames and body panels.
"Plastics, aluminum, and high-strength steels (HSS) are more prevalent than ever, and they are much harder to repair. All of the aluminum parts coming out create a particular challenge for shops due to fact they require specific tools and training," Neuman said. "Aluminum also has specific procedural and regulatory guidelines, which basically mean shops now need to have a 'shop inside a shop'. It's very costly. Plastics, which can't be repaired, are now even being used for engine parts, such as intake manifolds, valve covers, and radiator supports. They don't hold up like their metal counterparts, and the more frequent need to replace them is increasing collision repair costs."
An additional factor impacting fleet accident costs are new paint technologies.
"We are seeing more and more body shops that are switching over to waterborne paint technologies. Waterborne basecoats cost more then solvent basecoats," according to Martines. "The benefits shops are seeing using the waterborne paints are cleaner environment for painter's to work in, which leads to better productivity."
Examining Best Practices
A fleet safety policy and program are two best practices a fleet can employ to reduce the occurrence and cost of vehicle crashes.
"More companies are implementing safety programs, including both general safety information and targeted training for accidents and MVR infractions," noted Jeff Fender, VP, sales and marketing for Fleet Response. "This is helping reduce both the number of preventable claims and the accident ratio, thereby reducing the overall accident management cost for companies."
Another best practice fleet managers are employing is the better use of data generated by their fleets. "We are seeing an increased use of data-driven recommendations to make best-in-class recommendations," noted Bensel of PHH Arval. "Vehicle specifications and the use of advanced technologies, such as reverse cameras, lane departure, and blind spot monitoring are also helping reduce preventable accidents."
And, according to Martines of CCM, reports are being requested by everyone, from veteran fleet managers to "newbies," to help better manager drivers. New technology can also be used to help control costs and expedite repair processes.
"If you consider the overall cost of an accident — body repair, a replacement vehicle, driver and vehicle downtime, lost productivity, etc. — using technology to help locate parts (new or used) to expedite a repair can potentially save a few days in rental costs, which is very beneficial to a company," Martines explained.
However, Martines cautioned that not all technology is to the benefit of a fleet or its drivers. "Back-up cameras and sensors are a big help in reducing incidents; however, dependence on sensors can actually hinder an individual's driving ability. We have witnessed an increase in backing incidents and my belief is the driver does not look behind their vehicle when backing; they use the sensor as their primary means of proceeding or stopping," he said.
Charging for Deductibles
Fleets are still debating whether charging employees a deductible for a preventable accident is the best plan of action, and the subject-matter experts are divided:
"There is a very fine line to draw regarding charging a driver for accidents and companies should be quite deliberate in creating a policy to do so," according to Martines of CCM. "I believe a company should endorse a chargeback policy with stipulations: Any incident that is a result of carelessness or negligence by a driver should have a deductible charged."
Fender of Fleet Response noted that, while the programs can help recoup some of the repair costs and provide drivers with a portion of the responsibility, they have not proved to be a significant deterrent of preventable accidents.
"We have noticed a higher percentage of 'hit while parked/unattended' claims for companies with these types of programs, which suggests the accuracy of the claim information provided may be in jeopardy," Fender noted.
The deductible can also be tricky to manage. "We have seen a few clients who have tried to put deductibles in place many have stopped that method of managing the fleet. Deductibles can be a bit tricky as it often incents bad behavior and 'misreporting/non reporting.' The goal is to reduce crashes by promoting positive behavior as opposed to reprimanding drivers for negative behavior," Bensel said.
Whether a fleet charges deductibles for any accidents, preventable or non-preventable, a clear and concise policy is key to success.
"If a driver does not report the incident they should be liable to a more severe penalty than the driver who does report an incident. Having a policy with strong language is a good start; however, if the policy is not enforced, why waste time writing one? Like any program, enforcement is key and if it is supported by all levels of personnel, the results are more positive. Compliance leads to success," Martines said.
Reducing Preventable Accidents
Fleet management companies have been focused for years on reducing the hard costs associated with accidents.
Illustration by Armie Bautista.
"While effective initially, many fleet managers have found that these savings have plateaued as there is a limit to how much you can reduce costs associated with vehicle safety, maintenance, and repair," according to Rich Lacey, VP of product management for SambaSafety. "Savvy fleet managers now realize the best way to avoid accident costs is to avoid accidents all together. The most effective way to avoid accidents is to ensure you have safe, qualified drivers behind the wheel."
According to Lacey, this can be accomplished thorough background checks and a comprehensive ongoing driver monitoring program that allows you the ability to monitor driver behavior and take corrective action when necessary.
Also, with today's increased use of data to manage a fleet, the industry has become more data driven than ever before.
"However, what hasn't changed is the personal aspect of fleet, and that's the person behind the wheel," noted Brian Kinniry, director of strategic account services for CEI. "While technology has provided the ability to mine the data in an effort to paint meaningful pictures of your fleet, how a fleet utilizes this data to effectively communicate the information out to the field is critical to the success of a safety program."
And, a safety training program is one of the best ways fleets can work to reduce total incidents. "The most effective deterrent of preventable accidents is continuous safety training. This includes specific targeted training after an accident, company policy training, and continued general safety training through information and training lessons," recommended Fender of Fleet Response. "Continuing to update the current fleet policy and having drivers sign-off on updates also helps to reinforce expected behaviors. Reaching out to drivers with safety messages and training throughout the year will help to change behaviors."
Martines of CCM agreed, recommending that driver's take annual refresher courses to be constantly and consistently reminded of the best ways to recognize and avoid preventable accidents.
Continued monitoring of driver records can also help reduce preventable accidents.
"Drivers often exhibit behavior that is reflected on their driving records prior to an accident. By monitoring driving records, you can intervene before your driver has an accident. Intervention can be as simple as a conversation or a targeted online driver-training course," noted Lacey of SambaSafety.
Bensel of PHH Arval seconded the importance of driver training. "Providing proactive training to all drivers, as well as targeted training for high risk drivers, will reduce the number of preventable collisions, and the overall risk and exposure as a result," said Bensel of PHH Arval.
Sometimes, an overall blanket message to drivers may not be the best and most effective approach, according to Kinniry of CEI.
"We've experienced great success utilizing a 'micro-targeted' approach by providing customized messages to the driver population. These messages are personal in nature, often dealing with specific concerns to a particular driver or group of drivers or even the company as a whole," Kinniry explained. "Micro-targeting differs from traditional methods because it's not a generic, pre-packaged solution you buy from a third party. You have to really know your subject and be invested in their message for it to work. You need a strong customer/provider relationship and you need to be willing to make the investment to do it effectively."
Preparing for the Future
Technology continues to make a large impact on the future of accident management and costs will most likely continue their steady rise.
"Technology is continuing to play a large role in accident management programs. With the combination of accident management with robust safety programs, there is increased visibility and action surrounding driver behaviors," noted Fender of Fleet Response. "The result we're seeing is accident ratios continuing to drop while repair costs from new technologies and raw materials are continuing to slightly increase."
Martines of CCM also sees costs increasing. "Despite the efforts of many, it is inevitable costs will continue to rise. The cost of new vehicles has increased dramatically and so has replacement parts. Those costs are borne by the end user," he said.