Opinion: Outsourcing Accident Management

By Luann Dunkerley

Truck & Service Fleets

CEI Group Inc.

This Opinion piece appears in the April 16 print edition of Transport Topics. Click here to subscribe today.

In 2009, the latest year for which data are available, accidents cost truck fleets and owner-operators $48 billion, according to the U.S. Department of Transportation. The figure is a stunning 9% of the industry’s gross freight revenue of $544.4 billion for that year.

And because accident costs come straight off the bottom line, that number represented an even bigger hit to fleet profitability.

With so much at stake, the industry has been investing a huge amount of money, time and energy trying to reduce its accident rate. The efforts, which continue to show positive results, involve equipping trucks with more safety technology and a sharper focus on driver accountability and safety training.

But there’s another way that fleets can bring down the cost of accidents: outsourcing their accident management activities, including collision repairs, securing rental replacement vehicles, and subrogation — the pursuit of the recovery collision expenses from third-party drivers responsible for accidents with their vehicles.

For years, fleets have outsourced any number of services, from routine maintenance to information technology services to recruiting and hiring. But outsourcing a fleet’s entire accident management program is an idea that is just beginning to get noticed in the trucking world. The benefits can be great, both in reducing the expenses associated with repairing damaged trucks and in making the entire company more efficient by leveraging the fleet management department’s time and getting vehicles back in service faster.

Here are the potential benefits an accident management services provider can bring to a trucking fleet:

• A managed network of high-quality collision repair shops. Truck accident management companies oversee a managed network of body repair shops with whom they have longstanding relationships and who meet quality performance standards. This is a major benefit when a fleet vehicle goes down far from a carrier’s home territory, where it doesn’t know who the good, reliable suppliers are.

• Audited estimates that generate documented savings. Some accident management companies employ an in-house staff of licensed physical damage appraisers whose job it is to review estimates for price and quality and to negotiate with network shops. It’s these reviews that have been documented to save anywhere from 3% to 10% or more on individual repairs.

• Reduced towing expenses. Some provider networks offer coast-to-coast coverage, so that client vehicles are never very far from access to a qualified truck repair center.

• Reduced vehicle downtime. Because network shops are dealing with an accident management company that regularly sends them business, they deliver expedited priority service that a single fleet may not be in a position to secure for itself. This has the benefit of reducing or eliminating shop storage expenses and minimizing the expenses for rental replacement vehicles or the strain on a fleet’s ability to supply its own temporary replacement vehicles.

• Comprehensive Web-based reporting. Accident management service providers have invested in sophisticated, Web-based systems that collect and report accident program data for client fleets. Data can include digital files on every claim, including all basic claim information, photographs, police reports, witness statements and estimates. The systems also deliver a wide range of reports that enable fleet managers to identify trends in expenses and the types and causes of accidents, at a variety of organizational levels — and all in a matter of seconds.

• Improved loss recovery. Some accident management companies employ staff members whose only job is to pursue the recovery of damages for client fleets. Few fleets can afford the luxury of such a department. Accident management subrogation departments often identify opportunity for loss recovery in 20% to 30% of all accidents — and recover more than 90% of the dollars they target.

The hard-dollar savings alone from outsourcing accident management can be substantial. In 2009, for example, the average cost to repair a large truck that had been involved in a property-damage-only collision — one without a fatality or injury — was nearly $22,000. In a fleet with 10 such accidents, the total bill could reach $220,000. Recovering 90% of the damages from three of those accidents could reduce those net expenses by about $63,000, and saving just 5% on repair costs could trim another $11,000 — for net savings of $74,000. And that doesn’t include the additional soft-dollar savings of creating more time for the fleet department to devote to other tasks, as well as the time saved by getting the vehicles back on the road days sooner.

Fleet leaders shouldn’t underestimate the value advantage from leveraging their fleet management department’s time and resources. Over the past 10 years, the trucking industry has gone through a painful process of contraction resulting in the disappearance of thousands of trucking companies and the downsizing of the survivors’ staff.

The challenge now is to accomplish more with less. While outsourced accident management is a new idea in the trucking industry, it’s been a proven tool for sedan and mixed sedan-truck fleets for nearly 30 years. It’s high time trucking considered the advantages.

CEI Group Inc., Trevose, Pa., provides accident and risk management and driver safety services for fleets, as well as repair services for insurance companies.