Fleet Safety: A Critical Element to Your Risk Management Program

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By Stu Heit, Region Manager, Liberty Mutual Insurance
Matt Glovinsky, Technical Consultant, Liberty Mutual Insurance
Amy Leung, CSP, ARM, CRIS, Risk Control Advisor, Cavignac & Associates

Auto insurance can be costly. However, it can be a lot more expensive if you have a poor loss history.  A serious at-fault auto accident with significant bodily injuries can cost millions to resolve.  Fortunately, there are several actions you can take to manage your company’s automobile exposure.

Why do you need a fleet safety strategy that goes beyond compliance?

Industry trends show that costs are rising primarily due to claim severity and inflation associated with bodily injury claims costs.

  • Premiums take into account past performance.
  • The most common and costly vehicle accident categories are rear-end collisions and unsafe lane changes.  Both of these categories are generally avoidable and both are the result of driver behavior.
  • Accidents have a significant impact on business.  For example, if a company operates on a 5% profit margin, an accident with direct costs of $10,000 could require that company to earn an additional $200,000 to cover the costs.  There are also indirect (hidden and uninsurable) costs such as a supervisor’s additional time to train a replacement worker or having to rent a replacement vehicle. These indirect costs can easily be three times the amount of the direct costs.  So, this $10,000 loss could require an additional $800,000 in revenue to cover the total direct and indirect costs!

Which factors are considered when placing commercial vehicle insurance?

Typically, an insurer will consider all tangible features of a prospective fleet account including:

  • The number of vehicles/drivers
  • Types of vehicles
  • Where vehicles are kept
  • Radius of travel
  • Loss experience
  • Management controls

Should these factors be favorable, insurance premium credits can be significant. Conversely, poor controls could result in significant debits, all affecting the bottom line cost.  The difference between having a poor loss experience vs. a good loss experience can more than double the cost to insure a vehicle.

What does a risk control safety professional look for during a visit with a policyholder?

The main element a risk control advisor will look for is evidence of a solid fleet safety program.  The American National Standards Institute’s Safe Practices for Motor Vehicle Operations (ANSI Z15.1) is often referred to for best practices.

Some of the key components and evidence of controls from ANSI Z15.1 are:

  • Management Leadership and Administration – There is a written fleet safety program signed and endorsed by management.  The program addresses controlled substance use, seat belt use, mobile communication controls and program accountability with measurable results to assess effectiveness.
  • Operational Environment – Policies are in place to address aggressive and/or fatigued driving.  Documented driver training is provided for unique vehicles and cargo securement.  Written agreements are in place for employees who drive company, personal or non-owned vehicles for business.
  • Drivers – There are detailed job descriptions including the types of licenses, endorsements required and essential job requirements.  Job applications and reference checks are conducted.  Existing employees’ driving records are reviewed periodically to confirm continued driving eligibility.
  • Vehicles – There is a written inspection process and a preventative maintenance program in place.  Complete maintenance records are maintained by qualified maintenance employees or outside vendors.  Drivers inspect vehicles prior to use.  Guidelines are established for any emergency equipment that is provided inside vehicles.
  • Incident Reporting and Analysis – There are procedures for writing an incident report including who receives the report and the specific reporting time frame.  Incident reporting kits are in each vehicle and include a camera and forms with reporting instructions and contact numbers.  All incident reports are reviewed to develop corrective action plans and to facilitate incident trending.

 Additional key elements to a fleet safety program:

  • Driver selection controls – (MVR) Motor Vehicle Record review criteria should be established to define what is an acceptable driving history based on realistic expectations.  Hire drivers with good driving records; there are numerous studies that show the best predictor of future losses is past accident and motor vehicle citation history.
  • (EPN) Employer Pull Notice – The California Department of Motor Vehicles has an automatic, inexpensive and immediate notice program to advise employers of citations on their enrolled drivers.  The program costs are $5 to enroll a driver and $1 per year per driver for a written report. (see: https://www.dmv.ca.gov/vehindustry/epn/epngeninfo.html)
  • Traffic Regulation Compliance – Establish written accident investigation procedures.  Establish a following distance policy with a minimum of four seconds, plus an additional one second for every 10 feet of vehicle length for vehicles over 40 feet.  A study by the American Transportation Research Institute shows that drivers who were cited for following too closely have a 40% more likelihood of crashing.
  • Additional specific policies – Place restrictions on driver distractions such as: cell phones, texting, radios, CD players, etc.  Prohibit non-business use of non-passenger company vehicles and restrict use of company passenger vehicles to approved individuals only.  Establish procedures to remind drivers how to handle poor weather challenges.   Prohibit loaning of company equipment to unauthorized employees.
  • Personal vehicles – Employers with employees who drive personal vehicles while on company business need to protect not only those employees, but the company as well.  Utilize the same rules and selection criteria for personal vehicles as you do with company vehicles.  Review and maintain a list of approved drivers as this will help ensure that only properly screened and approved drivers are permitted to drive on company business. All personal vehicles used for company business should have proof of insurance. Consult with your insurance broker or agent for recommended limits.
  • Monitoring driver performance – Use of vehicle telematics and data (GPS, fuel mileage, average miles per hour based on routes or averages) can provide timely and valuable information for developing trends in both driver behavior and vehicle operations.  This can be a very valuable tool in proactively managing and mitigating undesirable outcomes.
  • Improving driver behavior – While training transfers knowledge, it does not ensure application.  It is important to observe drivers and provide incentives and resources for desired behaviors.  Telematics can provide driver performance data such as real-time speeding, braking and cornering which can be used to encourage and recognize desired performance.
  • Benchmarking – In order to gauge the effectiveness of the program, it is recommended that an organization compares its crash frequencies against a similar organization or trade from a recognized agency.  The DOT, National Safety Council and Bureau of Labor Statistics are examples of recognized statistical resources.
  • Training – It is a best practice for fleet training to include in-vehicle training on new or specialized equipment.  Be sure to maintain documentation of training materials and records and to conduct a periodic review of trainers and training outlines.

 Final Comments

A solid fleet safety program is important to protect employees, other drivers who share the road, and your company.  Failure to exercise proper care in hiring drivers and administering the fleet safety program could expose your company to additional liability and costs.


Additional Resources

(type “ANSI Z15.1” in search field)