Rising costs and supply chain challenges continue to dampen profitability for light- and medium-duty fleet carriers of all sizes. As the calendar turns to 2023, relief doesn’t appear imminent.
Therefore, fleets that make the proper investment in driver recruitment and retention, technology, and cyber defense mechanisms can reduce the risk of a catastrophic event impacting their operations.
In addition to the economic and supply chain hurdles, regulatory changes and a severe driver shortage are forcing fleets to invest in their drivers, as well as technological advances to keep them safe and reduce risks while on the road.
Battling Rising Fleet Costs
According to the U.S. Bureau of Labor Statistics, just about every line item on a fleet carrier’s budget has increased, making profitability a major worry.
Vehicle insurance increased 7.4%. New vehicle purchases escalated 10.4% and used vehicles surged 6.6%, making it extremely difficult to upgrade a fleet.
Additionally, the higher cost of parts (if you can source them!) and supply chain challenges have weighed heavily on the ability to rehab legacy equipment. That inflationary pressure is causing most carriers to struggle to remain profitable.
One of the primary ways to combat inflating costs is by improving compliance scores sent to insurance carriers, while increasing operational efficiency across the board.
Electronic logging devices and telematics are helping underwriters get more granular on pricing, as these offer unique insights into driver performance data, which allows underwriters to extend discounts to those with good safety records.
Lighter units can take advantage of less expensive phone sensor telematics data that can be embedded into dispatch technology versus electronic logging devices to reduce incidents and share data with insurers to leverage insurance negotiations or access the driver’s phone.
It’s not out of the question for a high-scoring fleet to see a flat rate or even a slight rate reduction. Yet below-average fleets still face pricing challenges. Fleet carriers must leverage this technology to track driver scores, train them on best practices and enforce safety.
Attracting and Retaining Drivers
Recruitment and retention of quality drivers continue to plague fleet carriers — but there are many avenues to attack it.
A popular route is to compete on salary by offering signing bonuses. Others have shifted to innovative health and wellness benefits, incentive programs, and advanced education and training to stand out.
Some are focusing on a strong culture, so drivers feel more connected to the organization and experience a better work-life balance. New digital insurance marketplace solutions to bring health and wellness programs to independent contractors and contract carriers are emerging that lessen misclassification risk.
Driver service programs, improved health and wellness resources, and driver management can effectively minimize risk. Managing drivers will be key to enforcing safety on the roads and reducing potential big-ticket claims and lawsuits that lead to significant reputational damage for fleets.
Driver management and human resources programs can help educate drivers and keep their skills sharp through continued education and ensure compliance with any ongoing training efforts. “Software as a service” systems can help document the completion of these initiatives.
With better driver training and tools available to them, performance should improve, pushing driver scores higher and giving fleets better rates and decreased costs overall.
California Assembly Bill AB5, which impacts the ability of independent contractors (ICs) to work for fleet carriers, casts a shadow over other like-minded states. To avoid misclassification, help your ICs become businesses, or consider hiring them in-house. Use technology to ensure legal and operational compliance.
Focusing On Driver Safety with Training
According to an American Transportation Research Institute report, Insurance premium costs per mile have increased 47% over the last 10 years thanks to:
- The alarming rise in nuclear verdicts.
- Increased risks associated with having more inexperienced drivers behind the wheel.
- Increase in the average claim.
Companies can reduce risk by installing in-cab telematics and cameras, then reporting incidents and promptly sharing that data with their insurance partners. This can allow for faster adjudication and settlement of all claims — from small ones to flagging the potential for run-away claims.
Artificial intelligence, in-cab technology, and integrated dashboard tools can reduce risk and make a difference in the outcome of claims.
Innovation in telematics has made it easier to determine what really happened in an accident. Video and other vehicle data can automatically to an adjuster for a speedy decision on who was at fault and how the claim should proceed. That type of technology also can help fleets protect their drivers when they were not at fault.
Accidents happen, but their severity and frequency can be minimized. Technology can help improve driver training and keep them from falling into bad habits by indicating when further education or retraining is needed based on driver performance.
Defending Against Cyber Threats
Fleet operators engaging in complex technology should also strengthen their cyber security. Ransomware is currently the greatest cyber threat to fleets, according to Freight Waves.
With access to digital in-cab systems, cyber criminals could access fleet data, potentially causing a vehicle to shut down, thereby endangering the driver and others.
Fleets must take the proper steps to thwart a cyberattack by implementing best practices, such as multi-factor authentication (MFA), and endpoint detection and response.
About the Author: Lisa R. Paul, CPCU, is Chief Strategy Officer for Transportation at global insurance brokerage Hub International. Creating, planning, and strategizing for success in transportation relative to the cost of risk, margin objectives, and driving organic growth through the digitalization of data for transportation clients and insurance brokerage operations and their insurance risk partners is her primary objective.
This article was authored and edited according to WT editorial standards and style. Opinions expressed may not reflect that of WT.