What is the true cost of a collision?
BackPaying the cost of vehicle repair or insurance excess is just the tip of the iceberg, with the true cost of a collision being much greater. When a company vehicle is involved in a crash, the obvious costs are just the tip of the iceberg.
For, unlike the bills for the repair or insurance excess which are easily visible, the real cost implications lay hidden beneath the surface.
These include losing key personnel to injury or ill-health, loss of business, potential loss of reputation and the expense of hiring replacement vehicles while company cars or vans are off the road.
“One of the challenges is that many of these figures never appear on a balance sheet,” says Andy Price, director of consultancy Fleet Safety Management.
“All the CFO sees is the insurance cost and maybe the cost of the excess. But they don’t see that the employee was absent for seven hours trying to sort the issue out with the leasing company, or worse that they are off injured as a result of the collision.
“Many organisations look at collisions as an inevitable part of doing business, so they accept these costs and they bury their heads in the sand somewhat and don’t think about what the knock-on effects are.”
The International Loss Control Institute says that for every £1 an insurer pays out, the uninsured losses can be as much as between £8 and £53.
Price feels that these figures are a “little bit on the high side because, while there is clearly hidden costs every time a collision occurs, if you start putting those sort of figures out into a boardroom then you would get laughed out because you can’t really justify them”.
As a rule of thumb, he doubles the claims cost because, although some of the numbers which come out are still horrendous, they are more believable.
The aim of highlighting the total cost of crashes to a board is to win investment and backing to either introduce a road risk programme or improve a current one to help reduce the number of collisions.
To further highlight the importance of addressing road risk, Price also uses another technique: he calculates how much revenue a company with an average claim cost of £1,000 would have to make to pay for its collisions.
If that company has a claim frequency of 25% and profitability of 10%, every vehicle on the fleet – not just those involved in a collision – has to generate £5,000 of revenue to fund the uninsured losses associated with the collisions it is having.
If the incident rate is higher or the profitability lower, then this figure will be even more.
Presenting the total cost of crashes to a company in this way is a real eye opener, says Price, and can help win buy-in to a risk management programme which will help to cut the number of collisions.
Click here to read the full article on Fleet News.
Want to hear more from Andy Price?
Price will be sharing his expertise on work-related road safety at this year's Fleet Live. Click here to view the speaker line-up.
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When? 9th - 10th October 2018
Where? NEC, Birmingham
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