Article

Putting a price on safety

NZI Business Hub

For any business with a fleet on the road driving accidents are a costly and inevitable price of doing business. Investing in safety and driver up-skilling can reduce the number of these incidents but can this additional cost provide a positive impact on your business’s profitability and viability?

Quantifying the cost of an accident that never happened is certainly a challenging task with huge degrees of ambiguity. We can however investigate the costs of poor driving and the direct and indirect costs of an accident.

A November 2017 UK study conducted by America’s Department of Energy and Oak Ridge National Laboratory showed that aggressive driving costs motorists close to NZ$1,100 per year per vehicle. A cost which of course increases when driving larger vehicles and with more time on the road. Once this additional cost is extrapolated across a whole fleet this can become very expensive. Furthermore, aggressive drivers tend to brake and accelerate harder increasing tyre wear and require the vehicle to undergo more maintenance.

National Manager, NZI Commercial Motor Vehicle Portfolio, Ian Taylor, advises if one of these at-risk, aggressive drivers has an accident, the direct costs can be substantial.

“The cost to repair any damage can be very expensive with many modern vehicles producing hefty bills. Although this is often seen as the insurer's responsibility, with some clients paying $50k towards the cost of repair it certainly isn’t a cost to ignore.”

“Time off the road also needs to be factored in, with one vehicle out of commission another needs to be hired to maintain capacity. This is often a difficult or expensive task when specialist vehicles are required.”

“Insurance costs need to be considered with a direct relationship between claims and premium charged. Put simply, if there are regular claims on your business’s fleet, premiums are likely to increase, costing more each year.”

There is also a myriad of indirect costs which require consideration as these expenses often exceed that of direct costs after an accident has occurred. Indirect costs include: time spent on investigations rather than on productive work; fines and penalties imposed if prosecuted; wages paid for unworked hours and potential double time to maintain capacity; costs of hiring and training replacements if the driver is out of work due to the accident and; additional admin costs that impact the business.

The cost to repair any damage can be very expensive with many modern vehicles producing hefty bills. Although this is often seen as the insurer's responsibility, with some clients paying $50k towards the cost of repair it certainly isn’t a cost to ignore.

Ian Taylor - National Manager, NZI Commercial Motor Vehicle Portfolio

With all these costs and the extent of any future crashes difficult to predict, we can’t calculate to a dollar figure. However, we can see that these visible direct costs are just the tip of the iceberg and businesses can expect to pay over and above the insurance premium and excess. This makes an accident far costlier to a business than perhaps realised and potentially balances the book in favour of investing in safety and driver training to minimise the number of accidents each year.

In the opinion of NZI’s industry experts, businesses that promote and invest in compliance and up-skilling have fewer claims. They have an open communications policy where safety issues are quickly addressed and a culture that embraces safety. Proactive businesses are investing in in-vehicle cameras to assist in reducing risky driver behaviour and support the identification and training of drivers at risk.

While investing in safety and up-skilling can’t prevent all crashes, it presents an opportunity for businesses to potentially improve their bottom line while improving road safety and making an ethical choice for their business.