Loyd Esler, a national sales managing director for insurance giant Liberty Mutual, has a warning for trucking fleet managers – if the choice comes down to hiring less-than-qualified drivers or letting equipment sit idle, you may want to opt for the later course of action.
“Within the trucking industry, the primary loss exposure is with drivers. Hiring qualified, competent drivers is crucial when attempting to control losses,” said Esler in a paper entitled “Challenges Driving the Trucking Industry” recently published by Liberty Mutual.
“In the short term, having the trucks on the road is the only answer. Revenue is critical to survival, operating margins are extremely high, and profit margins are thin," Esler siad. "But in the long run, however, this may or may not be the proper decision.”
Esler said unqualified and/or inexperienced drivers are typically involved in more accidents. They cause bodily injury and property damage to others as well as themselves.
In addition, customer satisfaction also suffers due to problems such as delayed or missed deliveries and improperly delivered loads. The ultimate cost to a company for having these drivers on the road can be substantial.
“Customer dissatisfaction is hard to quantify in exact numbers, but accident dollars can be readily measured,” he said. “Considering the large deductible policies most trucking companies currently have in force, the cost of losses is enormous, and the impact is nearly immediate.”
One way trucking companies can reduce this exposure is by establishing corporate policies that require potential drivers to pass a thorough and rigorous screening process before being hired, as well as continuous training after being hired. This practice may sacrifice potential revenue in the short run because not all of the potential candidates will be hired and some trucks will remain idle.
However, if the hiring policy produces a workers compensation and commercial automobile incident rate that is 50% less than the industry average, a trucking company would gain a significant expense advantage compared to its competition.
“Because of the lower cost of risk, a fleet would ultimately reduce overall operating expenses,” Esler said. “This kind of strategy focuses on the hiring and training process to produce a better quality ‘output,’ which results in improved service at a reduced cost.”