In this Digital Exclusive, Hadley Benton, EVP of business development at Fleet Advantage, talks about ways equipment finance companies can support companies with transportation fleets who are leveraging telematics and advanced safety technologies to provide a comprehensive solution in risk management.
While the economy entering 2024 continues to face plenty of challenges, there is no doubt that the entire business landscape remains predicated on the continued movement of goods across the country. The transportation fleets responsible for moving these goods have a responsibility to keep supply chains healthy, but they are facing increased risks that come with transporting goods over long distances. As a result, more equipment finance professionals are looking to make sure their portfolio of companies with transportation fleets are leveraging telematics and advanced safety technologies that provide a comprehensive solution in risk management.
Addressing driver shortages through a safety-centric approach
Equipment finance professionals understand that effective risk management in transportation includes many challenges, notably the significant driver shortage that has persisted over the past decade. Operating heavy-duty trucks is a physically demanding and high-risk job, making it the seventh most dangerous occupation in America with about 900 fatalities annually, according to the U.S. Bureau of Labor Statistics. Additionally, the amount of drivers dying on the job has increased by 6.6% over the last five years, highlighting how conditions aren’t exactly improving.1
Acknowledging safety, fostering a driver-centric culture, and harnessing telematics driven by sophisticated data analytics can build a knowledge bridge between operations and finance. This approach aids businesses in driver recruitment and retention, contributing to cost reduction and aligning with a strategic asset management plan focused on trucks equipped with advanced safety features.
Escalating safety risks and cost implications
The increased safety risks associated with transportation fleets pose financial challenges for equipment finance professionals. According to the recent ATRI (American Transportation Research Institute) report on the Operational Costs of Trucking, large truck crashes declined, but experts anticipate a rise in commercial auto liability premiums2.
Private fleets also confront safety risks, prompting the adoption of advanced safety technologies, such as forward-facing event-recording cameras, for enhanced visibility, tracking, and analytics. Although private fleets reported 0.47 DOT Recordable Accidents per million miles this past year, up slightly from 2022’s all-time reported low of 0.40 accidents per million miles, the National Private Truck Council 2023 Benchmarking Report says risky drivers are finally being trained up or trained out. Another benefit of these technologies is that they provide the information that private fleets need to challenge accidents on their record that are not their fault3.
Technology and data-driven risk management in equipment finance
When working with their clients, equipment finance professionals understand that an effective risk management and safety program starts with the pre-hire process and extends to post-hire monitoring of driver behavior. However, focusing solely on background checks and motor vehicle reports is not wise, as a lot can happen with this knowledge between the pre-hire screen and annual follow-up.
Leveraging technology, businesses can utilize an effective scoring system to score drivers. Whether it’s telematics, cameras, violations, collision history, or maintenance events, these all serve as early warning indicators for risk managers to decide what events they want to collect, score, and report, and then decide how to go about it.
An event-based scoring system, automated as much as possible, enhances overall risk profiling. Some of the most common events organizations use for scoring drivers are events include speed, harsh breaking, harsh acceleration, harsh cornering, and seat belt usage. A telematics system should capture these data points and provide timely reporting by driver not just by asset. It’s important to decide how to score and weigh each event for your overall risk profile of a driver.
Furthermore, the driver’s collision history should also be considered and incorporated into the scorecard, especially since at fault collisions can be a key indicator of future risk.
Recently, organizations have been inquiring more about identifying which “events” should be considered for scoring drivers, as well as how best to aggregate and analyze data from disparate sources into a holistic analytics tool that predicts who is more likely to be involved in a collision. Technology- and vendor-agnostic platforms are a must in these data analytics environments.
Competitive advantage thorough upgrading to new equipment with advanced safety features
Equipment finance professionals can ensure their portfolio of fleets secure a competitive advantage by upgrading aging heavy-duty trucks with newer trucks. Mostly these advanced safety features are now included in the original truck specification and included in the cost of the equipment. This strategic move not only prioritizes the well-being of drivers and other motorists but also significantly impacts the bottom-line finances of an organization.
Advanced safety features such as collision mitigation systems, lane departure warnings, and automatic emergency braking contribute to a substantial reduction in accident-related costs. In fact, according to settlement amounts of trucking cases settled between 2015 and 2023, the average truck accident settlement amount was recorded at $73,109, which includes cases where the defendant was operating a tractor trailer or other heavy/commercial truck4.
Furthermore, insurance companies increasingly reward organizations that prioritize safety. Upgrading trucks equipped with advanced safety features not only reduces the likelihood of accidents but also positions the trucking organization as a lower risk for insurers. In the last decade, truck insurance premiums have witnessed a gradual but consistent rise, according to data from ATRI. Premiums have surged from 6.4 cents per mile in 2013 to 8.8 cents per mile in 2022. When viewed in terms of hourly costs, this represents an increase from $2.57 in 2013 to $3.57 in 20225.
As the equipment finance industry continues to thrive, organizations prioritizing safety and risk management through technological advancements position themselves as leaders. Understanding the financial impact of safety measures, such as reduced accident costs and lower insurance premiums, facilitates effective communication to C-level executives in both operations and finance departments.
About The Author: Hadley Benton is Executive Vice President of Business Development at Fleet Advantage, an innovator in truck fleet business analytics, equipment financing and lifecycle cost management. For more information visit www.FleetAdvantage.com.
2 ATRI An Analysis of the Operational Costs of Trucking: 2023 Update
3 2023 NPTC Benchmarking Survey Report