The Roemer Report August 1988

Coming to Grips with the Driver Shortage

ABOUT THIS ISSUE: Insurance has become one of the major expense items for today's trucking company. Your insurance costs are heavily influenced by the national insurance markets. But they are also shaped by your own loss history and safety practices. W. F. Roemer has been conducting engineering studies with truckers for years. We see safety as a major opportunity for the average outfit to reduce both its direct and indirect costs. In many cases the costs and benefits of a trucking safety program are hidden. This month we are taking a hard look at the subject with an emphasis on how sound safety practices can help you save on insurance. The insights on these issues come from two seasoned trucking safety pros: Joseph R. Osterman, Vice President of Transportation and Safety for W.F. Roemer Insurance, Inc. and George L. Reeder, President of Fleet Safety Services, Inc. George's firm supplements our own safety engineering services.

• Trucking insurance is one of the few major variable costs you can control. And, the safety area is a major opportunity for substantial cost savings and internal efficiencies. For many truckers, safety is literally the difference between profit and loss.

• Any insurance company that provides you with coverage without doing a thorough safety engineering audit before and after your policy is in effect is doing you no favors. To control your costs over the long term, you need specific areas targeted for improvement and follow-up monitoring. Other­ wise, your hidden problems will simply be translated into a needlessly higher rate increase when your coverage is renewed.

• What's the most critical factor in a safety program? It's top management's support. The involvement and ongoing commitment of top management to safety is absolutely essential. Without it, sustained progress and lower long­ term insurance costs probably cannot be achieved. The one universal factor in all the excellent safety programs we've seen is an unshakeable senior management commitment.

• You may have a prize winning safety policy but it's useless without vigorous top management support. Safety is one area that is clearly a top-down process.

• Truckers hire most of their safety problems. We think it is absolutely vital for your company to conduct a thorough background check of each prospective driver to make sure that he conforms to D.O.T. requirements. We find it remarkable how casual some companies are in this key area. A good company that enjoys reasonable insurance costs will be tenacious in this process, collecting all information on drivers and their accidents. This means thoroughly comparing a driver's motor vehicle record and checking it against his application. Incredibly many companies don't make this basic check, probably guaranteeing needlessly high downstream safety problems and insurance costs.

• Thoroughly investigate a driver with a "driving under the influence" charge on his record. Moreover, be alert that a "reckless" charge could well be a reduced D.U.I charge.

• What about drug screens? Use them. They will probably be law in a few years. Many companies seem awfully timid about these screens. Drivers aren't stupid. The bad ones tend to apply to outfits without drug screens. Frankly, we think a responsible truck line should be prepared to go to court, if necessary, to keep a driver who takes drugs off the road.

• Let's face it. There's a driver shortage. Hiring and retaining first-rate drivers with good safety histories is one of the toughest challenges facing today's trucker. You’ll simply have to develop a climate in your organization that attracts and retains first-rate people. If you don't, you 'II pay more in insurance costs.

• Make sure that every accident--even minor fender benders-get religiously recorded. You can control insurance costs by measuring and monitoring accidents on an ongoing basis. We keep a computerized report showing the type and frequency of the accidents experienced by our insureds. Normally, we can track a basic problem in 30-60 days and make suggestions to eliminate it quickly. Such decisiveness is infinitely preferable to a problem that goes unchecked for 12 months. Failure to take prompt corrective action will usually lead to a stiff insurance rate increase.

• We've found that most trucking companies make it far too easy for a driver to have an accident. They practically apologize to the driver by asking him to fill out an accident report. Make accidents easy on the driver and you’ll get more of them. Watch what happens when your driver has to thoroughly fill out an accident report and spend a mandatory review session with your safety director. Your accidents and insurance rates will go down.

• Properly investigating every accident and taking appropriate actions can dramatically reduce your insurance costs. When you don't, you simply fail to pick up the patterns that later become an obvious component of higher insurance costs. Fail to track the dings and you'll find them getting progressively worse. Your old reliable driver may just need a new pair of glasses.

• How much insurance savings can a first-rate safety program produce? We'd guess that a company could reduce its basic insurance costs by 10% to 20%.

• How can a good safety program and record impact a company's insurance costs? It's hard to make generalizations in an industry as diverse as trucking, but here are some ranges. The percent of carrier revenue expended in insurance costs can vary from 3% to 4% of gross revenue on the low side and up to 12% on the high side. The low percentage is reflective of a company that really is living the safety message. The 12% figure is normally the burden of a poor safety record carried by a trucker destined to go out of business.

• In addition to the obvious insurance costs savings, a sound safety program can also produce additional indirect savings in other areas.

These include:

• Reduced loss of time.

• Improved customer service and retention.

• Reduced loss of equipment use.

• Lower equipment maintenance costs.

• Fuel savings (perhaps a mile a gallon or more with safety conscious drivers).

• You've got to have a quality-first philosophy to keep the quantity pressures from forcing you into poor safety judgments that nearly always come back to haunt you. In today's fiercely competitive market, the profit from the best load you have couldn't pay for the damages resulting from the most minor accident. Indeed, in some cases the needless extra time and cost of three or four long distance calls to clear up a safety issue could spell the difference between profit or Joss on a load. No load of freight can ever be too important to not take time to move it safely. In the end, you can't buy your way out of a severe accident.