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:

Evaluating Total Cost of Risk to Reduce Losses and Lower 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.

So the question is, what strategies are effective?

Increase focus on operational efficiencies

In a softer market, successful fleets haven’t sacrificed driver wages or customer service but sought operational efficiencies to drive down their cost per mile.

Be adaptable

Through the pandemic, many fleets transitioned their freight to meet new demands: PPE, reefer trucks carrying vaccines, etc. That same agility can be applied today as consumer demand fluctuates.

Invest in safety

“The cheapest accident is the one that didn’t happen.”

While investing in driver safety programs has upfront costs, effective programs and coaching can result in significant savings down the road. Preventing one accident alone can return  tenfold on the safety program investment.

Investing in safety can also improve or stabilize insurance costs. Insurers may offer better rates to fleets who can demonstrate a strong history of driver safety coaching and performance improvements. For fleets who take on more risk by reducing coverages or increasing deductibles, safety programs help mitigate that additional risk.

How Idelic Can Help You

The best way to reduce your TCoR is to reduce crashes. Fleets have seen up to a 20% reduction in accidents on the Idelic Program by leveraging Idelic’s Safety Suite alongside the Idelic Driver Safety Playbook. By consolidating your most important driver behavior data into one platform, identifying risky drivers with Idelic’s AI-powered Driver Watch List, and helping you coach drivers using step-by-step professional development plans, the Idelic Program is proven to help you mitigate risk, prevent crashes, and lower your losses. 

Click here to sign up for a consultation and identify how the Idelic Program will help reduce crashes at your fleet.