The Real Cost of Fleet Accidents

Nov 09, 2009

Many managers have trouble fully understanding the true costs of accidents within their fleet.  It is difficult not only to quantify how much money can be saved by accident prevention, but also to disseminate that information in a meaningful way to an entire organization.  In an article for Automotive FleetThe CEI Group Inc.’s Vincent Brigidi offers some ideas on demonstrating the costs involved in fleet collisions.

 

Accidents incur both direct and indirect costs to companies.  The surface damage to vehicles is only a small part of the real costs behind an accident.  After repairs to the vehicles themselves, other hidden costs such as worker’s compensation, third-party liability costs, legal expenses, lost revenue, and decreased productivity can increase the overall bill in a very significant way.

 

If the idea of a few extra charges doesn’t seem like much, consider this: after dealing with all of these extra expenses, the real costs of an accident can cost your fleet two to ten times the direct cost of the collision.  That means an accident requiring $2,500 in repairs and replacement rentals could really cost $5,000 to $25,000.

 

After you have determined what accidents really cost, the next thing to do is to make sure your company understands how that cost affects business and why it is important to prevent it.  Upper management will be making most of the decisions when it comes to new safety programs, so it is important to make sure they understand the real financial burden placed on the company by accident costs.

 

For example, if you were to take the expenses incurred by accidents and divide by your company’s operating profit margin, you would have the additional sales revenue necessary to make up for the cost of those accidents.  $500,000 in accident costs requires $5 million in revenue at a 10 percent profit margin.

 

A new safety program for a fleet that reduces accidents by 20 percent can save up to $1 million in additional sales necessary.  Money like that is a powerful incentive for fleet operators to make sure their investment is protected while making sure their drivers stay safe on the job.

 

For the full article, visit Automotive Fleet.

 

Photo courtesy of mrbill under the Creative Commons License.