One of the fastest-growing cost drivers and liability concerns for contractors is insuring their construction fleets. For many years, the “buck and a truck” has been an effective recruiting and retention tool. Yet in an industry where there is a growing shortage of skilled labor, getting that good tradesperson on board is the number one priority, and the issuance of a truck is standard practice. The thought of not providing a truck to a new foreman will nearly always elicit a “the sky is falling” response. So what should business owners do in this increasingly competitive environment to manage their auto liability?
Driver risk management is not a new concept. Nearly every employer with personnel who drive on company business conducts the annual motor vehicle record (MVR) check required by its insurance carrier. These are baseline checks to ensure the driver has a valid license and evaluate prior driving experience as it relates to moving violations, collisions and suspensions. The challenge this presents is with both the frequency these checks are performed and the risk tolerance of the person evaluating the MVRs.
One construction firm allowed its operations director to evaluate all drivers and decide who was permitted to drive a company vehicle. An insurance evaluation identified a significant number of drivers with troubling driving history; speeding in school zones, driving under the influence and reckless driving. The operations director did not see these as issues; as long as the employee had a valid license he was a production tool. They also looked at the driver’s history as just that; history, and not as a predictor of future issues.
Another concern was the frequency of checks. Most insurers require an annual MVR check, but what happens when an employee loses his license after the annual check and conveniently forgets to notify the company? This is where active risk management should be applied.
A driver risk management program will focus on consistent criteria and real-time tracking with notification of driver record changes. Allowing someone who has a questionable driving record to drive a company vehicle can be costly and could potentially create a scenario where negligent entrustment may be introduced. When a vehicle accident occurs, company records, including the driver’s history, will be discoverable during litigation. If the driver had repetitive moving violations and collisions, the company will find itself in the difficult position of explaining why the employee was allowed to operate the vehicle.
Providing an employee with a company vehicle is a decision that should not be taken lightly, and there must be an effective management system in place to control risk and prevent these losses from occurring. Demonstrated, consistent criteria are an absolute must in today’s litigious environment.
A construction fleet is critical to success. The capability to deploy service technicians, transport materials and navigate the rough terrain of a construction site are daily activities. The fleet is also one of the most outward representations of a business, a moving billboard for the company and its culture. Utilizing a fleet telematics system will allow a company to monitor unauthorized use of vehicles after hours, provide real-time location of the fleet to deploy personnel closest to the need and monitor the driving behavior of employees. Telematics systems are often credited for up to 30 percent in fuel savings due to reduced idling and moonlighting, as well as a change in driver behaviors. Speed is one of the first areas affected by telematics use, however these systems are not perfect. Understanding what needs to be monitored, appointing an administrator of the data and following through on coaching unsafe behaviors will ensure the investment provides a return on profitability and reduced liability.
In-cab cameras systems are one of the most impactful investments to protect a fleet. The cost for these systems has become very affordable, as low as $50 per vehicle. Cameras can be cloud-based so driver events can be reviewed, such as a hard brake or swerve. The systems identify cell phone use, fatigue and whether the driver was wearing a seat belt. They provide coaching tools and training to keep drivers on track. They can identify signs of excessive fatigue, enabling intervention before an accident occurs.
A branded vehicle can be an excellent marketing tool but it can also become a moving target. With the help of an in-cab camera system, companies can quickly determine if their driver was at fault, so they know when to settle or fight. Without a video system, a company may find itself defending an employee who actually was not at fault. Insurance carriers have mixed positions on providing premium adjustments for these systems, but regardless of any upfront premium adjustment, companies ultimately pay for claims.
Investing in vehicle safety technology can pay dividends. The rising cost to repair vehicles has resulted in rate increases for many businesses. Investing in prevention yields savings over the long term. As organizations source new vehicles, they should look for safety features such as backing sensors, cameras and when available, collision mitigation and lane-keeping assist systems. The upfront cost of these systems is still less expensive than downtime and repairs associated with an incident, without even considering liability exposure and future insurance costs. Preventing a collision from happening is a quick way to lower insurance costs.
As insurance rates rise, preventing loss will result in savings. As with any insurance program, risk is rated by exposure and past claims experience. Invest in resources and tools that will prevent loss and consult with a broker and risk management partner to recommend equipment and technology that will work best for the company. Outstanding contractors take a team approach to collaborate with their insurance and risk management partners to keep their operations running at their best.
