Subscribe
PurchasingB2B

Dealing with risk

Risk management strategies for fleets


March 29, 2017
by Kara Kuryllowicz

From the February 2017 print edition

Fleets require extraordinarily wide-ranging risk management strategies that address everything from hiring and fleet policies to driver behaviour and changing regulations and standards.

“Driving represents one of the greatest risks to an employee’s health and safety and by extension to the employer,” says Paul Wingate, strategic consultant, Element Fleet Management, who also notes that employees who drive just two to three hours daily, spend the equivalent of a full month of 24-hour days annually behind the wheel. “As a result, fleet managers must ensure drivers have the proper training and education on vehicles that meet the job/task requirements and have safety and ergonomic features that drivers know how to use correctly.”

In fact, Transport Canada reports that the annual social costs of the motor vehicle collisions in terms of loss of life, medical treatment, rehabilitation, lost productivity, and property damage, are measured in tens of billions of dollars.

“This emphasizes the importance of a company risk management framework that avoids or minimizes the risks of running a fleet and a commitment to managing fleet safety as a critical business activity,” says Wingate.

Moreover, according to David Gaskin and Jeremy Rouse, Fleet Loss Control Specialists from Aviva Canada, fleet operation risks also include service interruptions; the loss of products and physical assets (vehicles and content) due to collisions, theft and other factors; and any consequent impact on the firm’s reputation and goodwill.

Potential liability losses are the most significant exposure from an insurer’s point of view. As Aviva Canada’s fleet specialists point out, a single significant collision, particularly in a tort jurisdiction, but also in no-fault or government insurance jurisdictions, can result in a financial loss that dwarfs multiple total losses of vehicles or cargo. Liability is often compounded by negligence, error and indirect factors such as poor maintenance or driver fatigue. If the fleet operator didn’t follow the normal or legal requirements, for example, with regards to hiring, training, education, safety policies, vehicle condition, maintenance and more, plaintiffs’ lawyers could point to such a shortcoming and seek punitive damages. Aviva notes that fleets must keep meticulous records and have proof of the due diligence required to refute such litigation.

Human error
Statistics indicate that human factors are generally more important than the weather or the vehicle and its condition in collisions. Aviva Canada’s fleet specialists point to the Ontario Road Safety Annual Report in 2013, which states that for all vehicle types 69 percent of fatal collisions occurred in daylight, 76 percent in clear weather conditions and 64.8 percent on dry roads. Snow/ice/slush were present for just 16.4 percent of collisions and wet roads for 18.2 percent. Of the 344,000 collisions of all types occurring that year just under 21,000 involved mechanical defect. It is clear that improving driving skills in what most would consider ideal driving conditions would have the greatest impact on collision rates.

Overall, the biggest challenge and best opportunity to help drive success in risk management is simply education, the monitoring of performance and the application of corrective measures on an ongoing basis, note Aviva Canada’s fleet specialists.

Driver record checks are vital as is driver education and safety training. Driver scorecards that combine information from accidents, driver record checks and telematics data to predict driver behaviour can identify the driver-specific, customized training that may be required. Firms really need to target “aggressive” driving, which is a major cause of motor vehicle collisions that can also increase fuel consumption up to 37 percent.
“A program will fall short of its objective if a company fails to provide assistance to improve driver behaviour and/or does not identify and communicate the potential consequences of a driver’s actions,” notes Wingate, whose firm recently acquired the CEI Group, a leading accident program and safety management company in North America.

Truck fleets that want to reduce collisions often focus more on defensive driving instruction and refresher training. Fleets that operate in urban areas may combine training with the use of remote backing cameras, lane departure warning systems and related technology. GPS tracking and theft prevention tools, such as door sensors, alarms and location tracking, can help protect employees, vehicles and cargo.

“Companies that embrace technology will always have a leg up in the future, but the main driver of success is, and will always be, proper management and education,” say Aviva Canada’s fleet specialists. “A company that takes the time to evaluate the issues, then develops a program to correct them and continually manages performance will usually perform better over time.”

Training and education
Proactive and reactive training and education can help manage risk as can a safety culture that ensures “safety first” is embedded in the company’s values. Wingate expects fleet policies to emphasize the company’s concern for employees’ safety and the responsibility that comes with a company-provided vehicle. It clearly states that drivers must obey all traffic regulations and laws and includes specific maintenance directives as well as driving or journey guidelines.

It’s also important to recognize and reward safe, responsible behaviour individually and collectively and enforce consequences. Internally and externally, firms can share and celebrate the safety milestones they’ve achieved while acknowledging that all employees contributed to the success. Be sure that employees understand the safety policies by testing them. Regularly share those policies in the president’s messages and other communications to make them an integral part of the company’s brand and help keep safety top of mind.

“Most companies have a safety program, however risk managers are now realizing that rewarding good driving habits is just as important as corrective training,” says Romy Bria, director, fleet management, ARI. “Safety requires complete buy-in, top-down and bottom-up.”

To properly manage a fleet, its drivers and the associated risks, constant monitoring is required to track the firm’s performance on key indicators and assess the success of its various fleet policies, training and related programs.