Risk Management

In the long term, loss prevention (also called risk management) is the best method to cut insurance costs and provide a safe fleet for the operators and the public. Loss prevention programs do for accidents what PM programs do for maintenance.

These programs identify the risks and the contributors to accidents and manage them. Like PM programs, risk management is proactive: it's about anticipating problems and correcting them before there is a loss.

(Information for this section is derived in part from the National Highway Safety Council, Smith System [driver safety training organization] and materials provided to the Pepsi Bottlers for Loss Prevention Programs.)

Steps to establish a loss prevention/safety program:

  1. Set up a safety committee. The concept and organization of the safety committee is important. The mission of the safety committee is to conduct inquiries to determine whether an accident was preventable or non-preventable, determine ways company policy can be modified to prevent similar accidents in the future, protect drivers' rights, and involve more of the organization in the safety program.

The US National Highway Safety Council defines a preventable accident as, "... any accident involving a company vehicle which resulted in property damage or personal injury regardless of who was injured, what property was damaged to what extent, or where occurred, in which the driver in question failed to exercise every reasonable precaution to prevent the accident."

Committee members could include fleet management staff, safety staff, insurance people, drivers, and management. Usually the safety committee decides issues of preventability on the data collected alone, without the verbal testimony of the driver (only the driver's written report). In fact, Pepsi recommends that the committee not be given the name of the driver involved to try to insure a fairer hearing.

  1. Calculate your fleet's accident rate. This formula will highlight the extent of the problem and how it has varied over the years.

The National Highway Safety Council has a standardized formula to express the frequency of accidents (to establish rate and compare years to each other): Accident rate = Number of Accidents x 1,000,000/Total Fleet Mileage.

Publish your current and historical rates with the average cost per incident. The chart showing the trend should be displayed, discussed on a monthly basis and be incorporated into any existing incentive payment system.

  1. Gather all relevant information about the accident. This should include a driver statement, witness statements, a Police report, medical reports on the condition of the driver (if this is allowed), insurance company reports, diagrams or photos, physical evidence, company investigation reports, and recent maintenance records.
  2. Gather all cost data. This should include repair and downtime costs. Include non-financial costs, such as the "life costs" to any people hurt in the accident.
  3. Use the data collected and calculated to design a preventive program. All accidents have causes. Use the data to find out what your causes are and how you can remove them.

Key Point #1: All accidents are caused. Some people in the safety field believe that the word 'accident' is inaccurate because it indicates that the event was completely out of human control. In fact, many if not most accidents are preventable.

Key Point #2: The loss prevention program must have the support of top management. For maximum effectiveness, safety should be a high priority of management.

Key Point #3: The organization must commit resources in the form of a record-keeping procedure, a safety manager (can be a part time job with other duties) and a standing safety committee.

Key Point #4: The safety or loss prevention program should be applied across the board to all departments that operate the organization's vehicles (including sales, administration, etc.).

Key Point #5: The focus of the safety program is people. People cause accidents. These same people are also the ones who pay the greatest cost when they are hurt. The organization should expect (and require) the cooperation of the people. The program should provide effective training as well as written information about any accidents that do happen.

Part II of this column will appear in the next issue.