As companies try to tighten their belts,
they may be overlooking programs
that could, in fact, save money and their reputation. Businesses utilizing commercial fleets should implement vehicle
maintenance programs. Some businesses
have a haphazard approach to vehicle preventive maintenance (PM) and confuse “as-needed” or “crisis” maintenance with preventive maintenance, while others view their
fleet as a key asset and a rolling billboard for
their business and thoroughly track preventive maintenance for each vehicle.
The perceived cost savings of continuously
postponing PM certainly has an impact on
the decision to overlook PM, says Eric
Crandall, senior risk control representative
for Westfield Insurance. The increased durability of consumable vehicle components can
also give the false impression that PM is not
needed. This seemingly “quick fix” to cost
savings can cost much more in the long run.
Smart Business spoke with Crandall to
learn about how investing in PM programs
can help reduce insurance costs, save money
and help maintain a positive reputation.
What role do vehicle maintenance programs
play in obtaining vehicle insurance?
Insurance carriers evaluate the insurability
of commercial auto fleets from many different angles. Along with driver selection, qualifications, orientation, training, accident reporting, recordkeeping, etc., preventive
maintenance schedules are reviewed to aid
in evaluating the potential of a failure occurring while a vehicle is being operated that
could lead to injury and/or property damage.
Why are PM programs beneficial to reducing
costs and sustaining good business?
Formalized PM programs differentiate
companies that use a proactive approach for
commercial auto exposures as opposed to a
reactive approach of controlling auto claims.
Not surprisingly, companies with formalized
PM programs tend to experience fewer and
less severe commercial auto claims.
Though PM programs are only one of many
elements that determine loss experience,
companies with formal PM programs and
subsequent limited commercial auto claims experience are looked upon favorably and
enjoy far more competitive pricing for their
commercial auto insurance.
At some point, the anticipated maintenance
cost, less the remaining depreciation value,
will exceed the cost of a replacement vehicle.
Thorough maintenance records will allow
management to accurately determine this
‘break-even’ point and avoid spending capital
on an asset that is past its useful life.
Beyond preventing accidents caused by
vehicle deficiencies, PM programs and
inspections can aid in reducing many other
direct and indirect business costs, including:
- Injury of employees involved in accidents
- Damaged public opinion of a business
whose vehicle is involved in an incident that
inconveniences others via traffic congestion - Temporary loss of a company vehicle
- Loss potential of delivered product or
service equipment - Delayed product delivery or provided
services resulting in customer dissatisfaction - Renting or leasing a replacement vehicle
What should be evaluated in a PM review?
Insurance carriers want to verify that companies adhere to the manufacturer’s service
recommendations, recognize wear signs of
consumable components that must be
replaced or serviced, train drivers to identify
indicators of deterioration, pull vehicles out
of service that are in need of PM, adhere to
PM schedules and document PM performed
on each vehicle. Consumable components
that should be addressed include such factors as brake performance, tire condition,
steering system performance, vehicle lighting
and conspicuity, battery performance, etc.
PM programs should pertain to all vehicles,
from the company president’s private auto to
the fleet of delivery/service trucks; no vehicle
should be exempt from PM schedules.
Should such programs be outsourced or conducted by an on-site staff?
If a company performs its own maintenance, adequate facilities and equipment
must be provided, as well as ongoing training
of mechanics for changes in equipment and
repair procedures. Likewise, companies outsourcing vehicle maintenance should verify
that these mechanics are qualified to perform
the work and are reputable. In either circumstance, PM programs require management
commitment, qualified mechanics, a strict
adherence to developed schedules and continuous documentation of PM efforts.
What about the costs of PM programs?
The lack of a formal PM program actually
costs the business more in the long run via
maintenance-related accidents, delays, customer dissatisfaction and repair costs that
are greater than the value of the vehicle.
While many commercial auto losses can be
attributed to driver behaviors, poor PM can
be a contributing factor, if not the main factor
for many commercial auto collisions.
Separating these claims from the other commercial auto claims clearly demonstrates the
effectiveness of a formalized program.
Many companies with formalized PM programs learned long ago that worn, failed or
incorrectly adjusted components can cause
or contribute to accidents and adversely
affect their bottom line and reputation.
ERIC CRANDALL is a senior risk control representative for Westfield Insurance. Reach him at [email protected] or
(630) 587-1400.
