Accident management is a vital part of any fleet operation. Minimizing the amount your company spends on repairs can impact your budget in a big way. All the components that can add to the overall accident expense are interdependent on one another with the relationship between them likened to that of fal-ling dominoes, with the occurrence of one expense driving others. Vehicle design drives repair severity.
Severity drives repair cycle times, cycle times drive repair costs and rental days. These factors in turn can influence administration costs, appraisal costs, and fees for ordering police and MVR reports and ultimately salvage expense before your fleet vehicle hits a total loss.
Repair data by vehicle make & model, industry, and country region were analyzed in a recent study by CEI, a Philadelphia-based firm that specializes in accident management, handling more than 60,000 claims annually, The results are shown in the charts.
When different vehicle models in the same category are compared, as in chart 1, a substantial difference in repair severity exists between them. That variation can be due to design differences, which affect repair complexity, according to Greg Neuman, licensed appraiser and quality control supervisor for CEI.
“For example take two minivans, traveling at iden-tical speeds, both strike an object at exactly the same point of impact, with all factors being equal, the pas-senger airbag deploys on one vehicle through a door designed for this pur-pose, while on the other minivan, the entire dashboard and windshield is blown out resulting in an added one-thousand dollars in repair costs,” explains Neuman.
Variations in repair cost should be taken into consideration when planning your company’s vehicle selector. For many fleets this factor along with total operating expense is important in choosing the models for their selector.
For benchmarking purposes, the next category examined was severity by industry. In this category, law enforcement had the lowest average cost for accident repair, while the transportation industry had the highest, up to twice as much as the lowest average. The reason why law enforcement has the lowest average cost of any industry is that this industry generally keeps vehicles in service much longer, and foregoes costly cosmetic repairs that other fleets would consider necessary, according to Michael Hanssens, a manager of fleet operations at CEI.
“The transportation industry most likely has much higher repair costs because it operates a greater percentage of heavy trucks and specialized heavy equipment, which is much more costly to repair, in terms of parts and labor, than conventional vehicles,” says Hanssens.
Neuman also explains that another factor for the variation by industry is that some industries will allow like-kind and quality (LKQ) parts for re-pairs. Other industries might insist on original equipment manufacturer’s (OEM) parts be used, which will result in significant differences in the prices.
In Chart 4, severity by region of the country, the New England had the lowest average severity, while the South Atlantic had the highest.
To account for variation in expenses across regions, look to auto body hourly rates for metal/refinish, which vary widely from state to state. For example the average hourly rate in Sacramento is at $56 per hour, while in Nashville, it’s reported at $32, with Hartford, CT, falling somewhere in between at $45 per hour.
Hanssens sees an opportunity for cost containment. “While the percentage of severity attributed to parts expense has risen, the percentage attributed to labor has fallen – almost 17% in three years. That reduction in labor hours combined with substantial time saving resulting from a growing use of the Internet to manage claims and communicate repair assignments, estimates and vehicle damage images, is shrinking repair cycle times and the corresponding rental days. That should help to lower the current 10-12 day average rental period.”
With average severity rates up a reported 7 percent in 2000 according to the insurance/collision industry, the way certain fleets are able to mini-mize severity rates to only 2 percent is through effective accident management programs.
In the fourth category, determination of preventability, on the surface a non-preventable rate in excess of 62 percent may lead fleet managers to think that there is little that can be done to impact the majority of their accidents. However, this is not the case. When you further breakdown preventable and non-preventable into their specific accident types of moving, parked and comprehensive, which includes events such as vandalism, flood and car wash damage, you find that of the moving accidents, over 56 percent are actually classified as preventable. This demonstrates that more often than not the fleet driver is at fault in a moving accident, which could have been avoided.
For Joe LaRosa, fleet manager for Bristol-Myers Squibb, the implementation of a safety program has been an effective way to minimize growing accident expenses.
“On average, our repair costs have remained pretty constant,” said LaRosa. “What has gone up is the number of accidents. That is because we’ve had an increase in the percentage of accidents. To manage this expense, we instituted a safety program, which I personally administer to all the new employees.”