Insurance alone can't fully protect a fleet from loss. The best insurance policy is the one you never use. Indeed, the surest way to trim insurance premiums is to make no claims.
That's hardly possible, especially in a business as risky as trucking. Risks that threaten fleet safety and cost-effectiveness run the gamut from vehicle accidents to cargo loss and workers' comp claims.
Effectively managing the incidence and severity of these risks can trim insurance costs, protect investments in equipment and personnel, and help a fleet run more profitably.
Dig out roots Managers of safety-conscious fleets know the action taken after an accident is what can best prevent future occurrences.
That's why a proactive approach to workplace and highway accidents is a key risk-management strategy for the fleet fielded by Danbury, Conn.-based industrial-gas producer Praxair Inc.
Praxair's U.S. operation runs a fleet of some 500 tractors and 800 cryogenic tank trailers out of 60 terminals. Behind the wheel are 1,200 drivers, 70% of whom are company employees. About 70% of vehicle maintenance is handled in-house.
"One element in formulating new safety programs at Praxair," reports Tom Rule, national manager of trucking operations, "is the root-cause analysis we perform on all accidents. Getting down to the lowest possible denominator of each incident - and examining any trend lines that emerge - helps develop policies that prevent accidents from recurring."
"To be more proactive," he continues, "we've begun identifying at-risk behaviors and alerting employees to them so they can take corrective action before it leads to an accident. We feel that eliminating at-risk behaviors will help drive our safety stats to where we want them. Zero accidents and injuries."
According to Rule, Praxair has found most driver-caused accidents and injuries result from not sticking to the company's established safety policies or work procedures. In other words, drivers who take risks are invariably the ones who suffer incidents.
Group dynamics While Rule believes individual responsibility is key to reducing risks, he also recognizes the positive role group dynamics play.
"At our joint driver-mechanic safety meetings," he relates, "we brainstorm about what employees consider to be at-risk behaviors. And we post the results of these discussions conspicuously, so everyone can benefit."
Praxair also seeks to reduce insurance- and safety-related risks by looking to the wider world for ideas. To that end, the company culls "best practices" from its various overseas operations.
"Risk-management audit teams visit Praxair locations with superior safety records located around the world," Rule says. "The idea is to identify which practices are enabling them to maintain their safety performance and then put them to work here."
Another tool in Praxair's risk-management toolbox is benchmarking with outside firms. "We seek out companies in our field known for their outstanding safety performance and benchmark with them by exchanging information on best practices."
Employee training is an integral part of Praxair's risk-management strategy. "All new employees receive specialized training," Rule advises. "For example, drivers must complete 30 days of training before 'soloing' in our equipment."
The fleet also leans on the expertise of its experienced drivers to help it determine if a new hire represents a potential safety risk.
"Part of the interview process," Rule explains, "is a peer review of the candidate's safety attitude. Our drivers ask the right questions - and better understand the answers - to give us a good indication of how a new hire will approach safety issues and policies."
Along with protecting the fleet's reputation and profitability, Rule says effectively managing risks "lets our people know this is a safe place to work. And that helps us attract and keep the best people."
According to Rule, the goal of risk management is straightforward: no accidents, injuries, or fatalities on the job. That way, he says, "you end up with fewer workers' comp claims, less cargo and equipment damage, reduced employee turnover, and lower insurance rates."
Down and counting Since implementing a series of "practical recommendations" developed with the assistance of its insurance carrier, Watkins Motor Lines has seen its occupational injury rate drop 63%.
What's more, during the same time frame, the fleet experienced phenomenal growth, tripling its employee roster (to 9,000) and nearly doubling its company locations.
Based on revenue, the Lakeland, Fla.-based LTL carrier now lays claim to being the ninth largest LTL carrier in the country. It operates from 126 facilities situated in 41 states.
Ron Chipman, executive vp-risk management & benefits, says Watkins attained that whopping safety improvement by "concentrating up-front" on risk-management.
"We started by requesting that our insurer, Liberty Mutual, help us to analytically uncover the sources of incidents, whether related to drivers, maintenance, or freight handling. From there, we developed practical recommendations that management could put into practice in the field."
Much emphasis was placed on what drivers alone can do to prevent injuries and accidents. "Along with instructing drivers on how to avoid occupational injuries, especially slips and falls from entering or exiting the cab, we've directed their attention to the effect sleep deprivation has on their safety performance," Chipman relates.
"We're even looking into the feasibility of using tools for measuring the awareness factors that indicate fitness to drive after completing time off," he notes.
Going well beyond its driving force to curtail risks, Watkins has improved ergonomics, safety equipment, and training everywhere from its offices to its shop floors and docks.
"Materials handling is a major target of risk management," Chipman states. "It accounts for about 85% of the injuries incurred by an LTL operation. Improper forklift operation alone is a source of many losses."
The fleet is also focused on what it can do after an incident occurs. Two years ago, it launched a program dedicated to helping injured drivers and maintenance personnel return to work earlier.
"Working with our insurance carrier, we established alternative, modified duties these workers can perform in the shop," Chipman explains. "This is not 'make work' by any means, but restricted duty that conforms to their medical requirements.
"Making an early return to work possible," he continues, "boosts morale. Letting the injured employee get back to doing something productive is seen as a good-faith effort by the company. And reducing the number of disability days cuts down on our medical and lost-time costs."
Chipman serves as chairman of the ATA Insurance & Risk Management Advisory Committee, which he notes recently completed a guidebook on the benefits of early-return-to-work programs.
Proof that even a fleet suffering a high degree of driver turnover, vehicle accidents, and cargo claims can morph into a safety-driven organization in little more than a year is offered by American Central Transport Inc. (ACT).
Liberty, Mo.-based ACT is a regional TL carrier serving the Midwest and Southeast. It fields a fleet of 50 tractors and 600 trailers and leases power from 150 owner-operators. Since company trucks are traded every three years and its trailers every four to five, the fleet's single shop generally handles only minor maintenance and light repairs.
Back in 1994, Tom Kretsinger Sr., the carrier's president & owner, became determined to find out "what it would take" to retain more drivers, cut accident and insurance costs, and improve customer satisfaction.
The answer, says Nick Finazzo, senior vp-risk management, was simple. "ACT didn't pull anything out of the sky," he states. "We went back to the basics - especially in hiring drivers."
In February '94, Finazzo says, the fleet decided to tighten its hiring requirements - and, just as importantly, stay with them until things turned around.
"We felt that bringing in higher-quality drivers would reduce turnover, cut our exposure to accidents and cargo claims, improve delivery times, and even sharpen the paperwork turned into our office," Finazzo explains.
"The results the first year were a wash, since we had to park some trucks for lack of qualified drivers," he continues. "But we had Tom's full support, and he felt it would cost more in the long run to revert to the old way of hiring just to fill seats."
But by the next year, concrete results began pouring in. "Sticking with the program, we began to see a dramatic reduction in both accidents and cargo claims," Finazzo asserts.
The fleet is so serious about its commitment that drivers who had left voluntarily prior to '94 must now meet the new standards before being hired back. More to the point, many don't.
While asking more of drivers, ACT has also given them more reason to join and stay with the fleet. "For one thing," says Finazzo, "we recognized you can't get quality people for sub-quality pay. We're now a leader in terms of driver pay and owner-operator miles."
Another way ACT has made itself safer and more attractive to drivers is by whittling down the number of customers it serves and limiting the type of freight it hauls.
"Our marketing staff fine-tuned our customer base to a core group of 30 or so major shippers," Finazzo explains. "All provide driver-friendly freight and allow more drop-and-hook.
"This lets our drivers become more comfortable with the freight they haul and lets our customers become familiar with them. Putting drivers in an environment they want to be in helps bring quality applicants in the door in the first place."
According to Finazzo, over the last three years these changes have garnered ACT savings "on straight premium dollars of well into seven figures." Not to mention the "untold dollars saved from the accidents and injuries that never took place. "The bottom line," Finazzo adds, "is protecting people. If you do that, everything else about risk management falls into place."