Idelic’s Senior Vice President of Insurance, Michael Gramm, met with ATA’s David Bauer and ATRI’s Alex Leslie in a virtual event to discuss the economic outlook for 2023 and how fleets can reduce their Total Cost of Risk (TCoR) to increase profitability. During their discussion, they highlighted trends fleets are implementing to optimize their TCoR.
Managing Risk is Critical
Industries and businesses are focused on sustaining or protecting profitability in the current economic climate. For commercial auto fleets, managing the cost of risk and cash flow is paramount as consumer demand for goods fluxes and interest rates continue to rise. Some of the challenges fleets are facing include:
- Inflation rising over 8% in 2022 and remaining high is impacting businesses and consumers.
- Driver Shortage is projected to be at 78K and remains a major challenge for fleets. There are growth opportunities for fleets providing a safe, attractive offering for female drivers who currently make up only 8% of the driver force. Experts suggest issues like the truck parking shortage and rest stop safety will need to be addressed before fleets can effectively recruit more female drivers.
- Rising Interest Rates challenge the entire industry. Fleets in moving & storage are experiencing acutely with a slowing housing market.
- Rising Costs over the last two years include driver wages, in part due to the driver shortage and competitive labor market, and repair and maintenance costs due to the accessibility of new trucks.
Total Cost of Risk (TCoR) Defined
TCoR includes all costs, preventative or responsive, that impact safety outcomes. Many fleets have an imprecise estimate and costs are overlooked. Here is a breakdown of those hidden costs:
Strategies to Cut Costs
Not all strategies to reduce risk have proven to be effective for fleets, some even inadvertently increase their TCoR.
Example: One study discovered that 1/3 of carriers spend less on wages and 1/4 spend less on equipment or maintenance to compensate for rising insurance costs. This is both dangerous and ineffective, resulting in rising accidents, unsafe behaviors, and higher premiums.