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In 2009, several trends in managing accident management costs emerged. Fleets across the country are working with accident management providers to mitigate the impact of increased in-vehicle technology, alternative-fuel models, and environmental regulation compliance.
Increased Technology Impacts Accident Management Costs
As vehicles become more advanced, some technologies, which were originally only offered in higher-end luxury vehicles, become more prevalent in lower-end vehicles, according to PHH Vehicle Accident Services.
"This technology can add cost to re-pairs, so fleets may see higher accident repair costs as the technology spreads to more and more vehicles throughout the fleet," said Eliot Bensel, director, PHH Vehicle Accident Services.
In addition, PHH is seeing costs increase because more vehicles demand a higher level of knowledge from body shop technicians, "so the shop can't repair it or get parts for it as well as the dealership can," said Bensel.
For example, alternative-fuel or hybrid vehicles, supplemental restraint systems, active suspension systems, and other onboard technologies and electronics, require more complex repairs, explained Bensel.
"In addition, some of the newer design structures use special alloys and reinforcement systems designed to better protect the occupants," he continued. "The specialized metals and design characteristics require very specific repair methods, tools, and equipment. These things all require a higher level of training of the technicians and a higher expenditure on overhead."
Also increasing costs, "is the continuous need for compliance with environmental regulations, including the refinish costs, as paint manufacturers have to pass that added cost of environmental compliance in their products down to the body shop," said Bensel.
Fleet Response reports a significant trend in increased client consideration of alternative parts such as LKQ or aftermarket.
"In the past, we had many clients prefer to only use original manufacturer's equipment when repairing a damaged vehicle in their fleet, but when they see the cost savings, they are definitely re-thinking that mindset and electing to use aftermarket parts," said Stuart Braun, adjuster and maintenance supervisor for Fleet Response.
Bob Martines, president and CEO of Corporate Claims Management (CCM) noted, "more evident is the attempt to reduce accidents in general through more aggressive proactive safety programs, in-vestments in more high-tech GPS tracking, and holding drivers more accountable."
GPS Assists in Proactive Accident Management
"One of the latest trends in proactive fleet accident management Fleet Response is seeing is that more and more clients are adding our safety solution to their program," explained Allison Lanzilotta, vice president, business development for Fleet Response. "By adding the safety component to their accident management program, we can provide training to their employees based on company-wide accident trends as well as targeted training based on individual driver deficiencies."
Telematics technology is constantly improving in its ability to help fleets reduce their accident rates, noted Bensel of PHH. "GPS systems, as well as in-cab active management tools that alert drivers real-time when they exceed pre-set speed, idle time, or harsh braking parameters can help improve risky driver behavior that leads to crashes."
If an accident does occur, PHH developed a mobile application called PHH Connect that allows drivers to click one button on their mobile device to immediately reach PHH operators who know drivers' identities, their fleet vehicle, and why they're calling.
"In addition, PHH developed proactive automated notifications that go out to drivers who reported an accident. We contact them via e-mail or PHH Connect to confirm elements of their conversations with the PHH agent, such as what happened, which repair facility to use, their appointment time, and further instructions - all according to that particular client's fleet policy," said Bensel.
Fleets Continue to Forego Cosmetic Repairs
Foregoing cosmetic repairs has been an ongoing practice. "In fact, PHH often recommends that fleets, particularly those that include service vehicles, forego cosmetic repairs," said Bensel of PHH. "In many cases, we have seen repairing a vehicle has a negative impact on resale, as it causes a potential buyer to assume a worst-case scenario when the accident could have been minor in nature."
A new trend, PHH has witnessed even higher-level luxury vehicles turned in to sell "as is" without repairing minor damage.
"Fleets are trying to keep vehicles on the road longer to hold down the cost of acquiring new vehicles," noted John Wolford, senior manager of provider network services for CEI. "Where in 2009 we saw an increase in vehicles declared a total loss, in 2010 we're seeing a slight decrease."
According to CEI, more fleets are spending money to repair vehicles that in the past were declared total losses. "The reason is that, even though the repairs may cost more than the market value of the vehicle, they're less expensive than replacing the vehicle with a new one," said Greg Neuman, quality control supervisor for CEI.
Chris Villella, senior manager of loss recovery and insurance for CEI, added that they have also seen more fleets opt to outsource subrogration programs.
Similarly, Fleet Response reports some fleets forego some cosmetic repairs to damaged vehicles due to budgetary constraints. "We may see an estimate come in for dents and scratches," said Braun. "Where a fleet manager might have incurred the cost to repair the vehicle in the past, they are now telling us to not move forward with the repair. Some companies are monitoring their repairs a lot more closely now."
Recently, CCM has witnessed some companies opting to total "borderline" repairs on 40,000- to 50,000-mile vehicles and purchase new replacement units.
"Depending on the type of fleet we are talking about, in many cases with budgets still being squeezed, some companies are trying to hold down costs," said Martines of CCM. "I have seen this more evident with smaller fleets, as well as regional companies. Larger companies that already went through their downsizing and have become more profitable have finally started to loosen the 'purse strings' a bit."
However, noted Martines, "this practice is not across the board as of yet."
Charging Preventable Accident Deductibles
Driver deductibles can be one of the toughest fleet policies to enforce.
"Typically, if a driver knows he or she will be held accountable for an accident and there is no one above the driver to validate a claim, the policy is ineffective," said Martines. "The easiest way around a deductible is claiming parking lot damage, hit and run, or vandalism to name a few. If the driver is held accountable regardless of the type of incident, they simply will not report any claim when there is no other party involved."
Fleet managers can ensure a driver will not elude the deductible through daily vehicle inspections, either with a pre-printed checklist the driver signs and forwards to his or her manager, or photos easily taken with a cell phone or digital camera and e-mailed to the fleet manager.
The driver's manager must periodically inspect the vehicle to ensure report accuracy.
"We have clients that utilize the checklist procedure with great results. If a driver falsifies the report, he or she is subject to immediate termination. The same holds true for the manager," said Martines. "One client gives the manager an incentive to review the vehicles. Needless to say, when additional revenue is available for compliance while termination is the option for false reporting, it is not too difficult to figure out what works."
A few PHH clients charge deductibles for preventable accidents.
"It's very good for increasing awareness on the part of drivers. However, one thing you must watch out for is that many drivers won't report accidents if they know they will have to pay a deductible. Some companies think they drastically reduced their accident rates, when in reality, they only reduced the rate of accident reporting," said Bensel of PHH. "You need to get your accident management provider to help you dig deeper and analyze your results, especially if your accident rates suddenly appear to be artificially low."
Braun of Fleet Response said, "The main advantage we noticed in charging an employee a deductible for preventable accidents is drivers become more conscientious knowing they have financial responsibility. The main disadvantage is some drivers are hesitant on reporting claims immediately. Additionally, some clients that implemented a deductible for preventable accidents have seen a spike in more accidents being reported as hit while parked and unattended."
Part 1 of this two-part series, "Economic Downturn Influences Fleet Accident Management," appeared in the June 2010 issue of Automotive Fleet, and discussed factors impacting accident management costs in 2009.