Fleet risk An overview by LeasePlan UK July 2018
What is risk? • • The Oxford English Dictionary When we talk about fleet risk, we defines ‘risk’ as follows: are talking about fleet-related situations that could be dangerous or have an undesirable outcome. Risk : ‘A situation that • When we talk about risk could be dangerous or management, we mean not just have an undesirable the prevention of these situations, outcome.’ but also the correct response to them.
Why do fleets need to manage risk? There are three main reasons why fleets need to manage risk: 01. To avoid 02. To save 03. Because we are accidents money legally obliged to!
Avoiding accidents According to the Department for Transport’s statistics: 38,028 Vehicles involved in personal injury accidents in 2016 In the five years to 2016, there were That’s about 100 a day! 238,082 casualties in accidents involving someone driving for work 25% of all casualties during that period Sources: DfT, Reported Road Casualties Great Britain: 2016 (2017), Tables RAS30036 and RAS30037
Saving money Every time an accident happens, it incurs financial costs for the fleet involved. These can include: – – The cost of repair Higher insurance premiums – The cost of downtime and of – Welfare and medical fees reduced productivity – Fines and court costs We calculate the average £750 cost of having a van out of action per day is Source: https://insights.leaseplan.co.uk/fleet-issues/commercial-vehicles/interview-van-best-practice/
Legal obligation There are many regulations surrounding fleet risk. Many of them are neatly summarised by this passage from 1974’s Health and Safety at Work Act: • It is important to remember that the law applies to all fleets equally – not just big ‘It shall be the duty of every fleets with big compliance teams. employer to ensure, so far as is • reasonably practicable, the If anything, smaller companies have more health, safety and welfare at to lose from not thinking about risk work of all his employees.’ management. They could be totally ruined by the costs arising from any incidents. Source: https://www.legislation.gov.uk/ukpga/1974/37
How do we manage risk? • A good place to start is the Health and Safety Executive’s Driving at Work document. • This summarises both the law and how its requirements can be met. Fleets should measure their current performance against it, and then devise a plan to overcome any shortfalls. • Three themes emerge from the HSE’s recommendations: 1 2 3 Regularity Vigilance Breadth Source: http://www.hse.gov.uk/pubns/indg382.pdf
Regularity 1 • Risk management cannot be done every so often • It must be part of a fleet’s everyday work • For example, vehicle checks should be performed on a daily basis. These should cover: Brakes Tyres Wheel fixings Windscreen wipers Lights Mirrors Bodywork Trailer couplings Number plates Load security Ancillary equipment
Breadth 2 • Risk management encompasses more than just the vehicles that are owned or leased by a company • It also encompasses the ‘grey fleet’ vehicles that belong to a company’s drivers… • …and the drivers themselves. • Drivers should receive training throughout their employment: – General induction training when they join – Refresher training, including updates on any new laws – Special training for drivers identified as higher risk
Vigilance 3 • Fleets should record and review as much data as possible • This serves several purposes: – It enables fleets to make the right choices about their risk management policies – It helps fleet managers to persuade others in their organisation – It can strengthen the company’s case in the event of any accidents, e.g. with insurance companies – It can reduce the likelihood of accidents in future • Telematics are an increasingly important part of this process
Conclusion • Risk management should not be an afterthought, nor regarded as a burden. • It saves fleets both time and money – and not just because it reduces accidents. It also helps keep vehicles in generally good condition, cutting down on fuel bills and maintenance costs. • Most importantly of all, risk management improves the happiness and wellbeing of a fleet’s workforce – as well as of everyone else on the roads.
Cost analysis The hidden costs of accidents
The two types of cost Broadly speaking, there are two types of cost associated with road traffic accidents and incidents: 1. The direct costs 2. The hidden costs These are the clear and immediate These are all the other costs of the costs that arise from the incident – most incident. Generally, they are much less easy to quantify – but they can be many often, the cost of repairing the vehicle that was involved. times more expensive than the repair itself.
The economic effect of accidents • It’s worth observing that road traffic accidents have an immense macroeconomic impact. • According to the Department for Transport: – In 2016, the lost economic output due to road traffic £4.6 billion accidents amounted to £4.6 billion – which is to say, the economy was about £4.6 billion smaller than it in lost economic output would have been had those accidents not occurred – When other elements, such as property damage and £36 billion insurance, are factored in, the total cost of accidents that year was £36 billion total cost of accidents Source: DfT, Reported Road Casualties Great Britain: 2016 (2017), Table RAS60003
The effect on fleets • And if we look specifically at those road accidents involving people driving for work: – 38,028 work vehicles were 38,028 involved in accidents in 2016 vehicles involved in accidents – In 2014, the lost output from £491 million work-related road accidents amounted to £491 million lost output from accidents Sources: DfT, Reported Road Casualties Great Britain: 2016 (2017), Table RAS20010, and IAM RoadSmart, Evaluating the costs of incidents from the public sector perspective (2016)
The direct cost Beyond these huge headline numbers, what actually is the direct cost of an accident for a fleet? £1,678 32% > the average cost of repairing a car after higher cost compared to three years ago an accident. Source: https://www.abi.org.uk/news/news-articles/2016/12/motor-insurance-premiums-reach-highest-recorded-levels/
Why are repair costs rising? What explains that 32% increase in the average repair bill? The Association of British Insurers gives two reasons: 1 2 ‘[The] rising cost of spare ‘Increasingly complex vehicle technology.’ parts due to currency fluctuations.’ Source: https://www.abi.org.uk/news/news-articles/2016/12/motor-insurance-premiums-reach-highest-recorded-levels/
The hidden costs • As a measure of how many more costs there are other than repair costs, the International Loss Control Institute says that, for every £1 an insurer pays out for an accident, the uninsured losses can be as much as between £8 and £53. • These extra, hidden costs can include: Vehicle downtime Reduced productivity Replacement vehicles Court costs Insurance premiums Fines and compensation Reputational damage Administration Accident investigation Source: https://www.fleetnews.co.uk/fleet-management/risk-management/what-is-the-true-cost-of-a-collision-experts-explain
The human cost • So far, we have been looking mostly at financial costs. There are, of course, other, sadder costs arising from accidents. • The Department for Transport reveals that, in 2016: 38,250 5,269 529 people slightly injured in people were people were accidents in accidents seriously injured Killed involving someone driving or riding for work • This means that 24% of that year’s casualties involved people driving for work. Source: DfT, Reported Road Casualties Great Britain: 2016 (2017), Table RAS30037
The hidden human costs • The human dimension results in other hidden costs for fleets. • These may include: Temporary staff replacement Permanent staff replacement Third-party injury costs Counselling Re-training Welfare and medical costs Lost expertise
Ways of controlling these costs… • Once an accident has occurred, there are ways for fleet managers to keep costs down. • For example, reporting the accident swiftly to an insurer or incident management company can help to prevent costs from spiralling. According to FGM, a failure to do so can increase costs by up to 900%. • In which case, fleet managers should make the reporting process quick and convenient for their drivers – perhaps by establishing a 24-hour helpline, or by using an app. Source: https://www.fleetnews.co.uk/fleet-management/risk-management/what-is-the-true-cost-of-a-collision-experts-explain
…but the best control is risk control • Of course, the best way to avoid these costs is to avoid accidents in the first place – which is what proper risk management can achieve. • If fleets invest in things such as driver training, vehicle maintenance, telematics and route-planning, then they should be sparing themselves from even bigger bills in future… • …as from well as the tragic, human costs that arise from accidents.
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