Last week I was talking with a fleet safety manager about the intangible costs of collisions for his employer. At BrightFleet we sometimes create an ROI analysis for qualified and interested prospects in order to provide them the financial information that they need to determine in our driver safety training product is a good fit for their company, or to help them “sell” our program “by the numbers” to other stakeholders within their organization that are involved in the buying decision.
Below you can find a summary of the types of direct and indirect costs of accidents that may ultimately affect your organizations bottom line. In addition to the direct or indirect costs, there are also the intangible and nearly impossible to measure costs related to losing an employee to injury or death, and the incalculable costs to their family.
Federal Motor Carrier Safety Administration. “Revenue Necessary To Pay For Accident Losses” Accident Cost Table. 2010. U.S. Department of Transportation. 1 Jan. 2011
Direct Costs of Accidents:
- Cargo Damage
- Vehicle Damage
- Injury(s) Costs
- Medical Costs
- Loss of Revenue
- Administrative Costs
- Police Report
- Possible Effect on Cost of Insurance
- Possible Effect on Cost of Workmen’s Compensation Insurance
- Towing Costs
- Storage of Damaged Vehicle
Indirect (Hidden) Costs:
- Lost Clients/Customers
- Lost Sales
- Meetings Missed
- Salaries Paid to Employees in Accident
- Lost Time at Work
- Cost to Hire/Train Replacement Employees
- Supervisor’s Time
- Loss of Personal Property
- Replacement Vehicle Rental
- Damaged Equipment Downtime
- Accelerated Depreciation of Equipment
- Accident Reporting
- Medical Costs Paid by Company
- Poor Public Relations/Publicity
- Increased Public Relations Costs
- Government Agency Costs
REVENUE NECESSARY TO PAY FOR ACCIDENT LOSSES
This table shows the dollars of revenue required to pay for different amounts of costs for accidents:
| It is necessary for a motor carrier to generate an additional $1,250,000 revenue to pay the cost of a $25,000 accident, assuming an average profit of 2%. The amount of revenue required to pay for losses will vary with the profit margin. | |||||
| YEARLY ACCIDENT COSTS | PROFIT MARGIN | ||||
|---|---|---|---|---|---|
| 1% | 2% | 3% | 4% | 5% | |
| $1,000 $5,000 $10,000 $25,000 $50,000 $100,000 $150,000 $200,000 |
$100,000 $500,000 $1,000,000 $2,500,000 $5,000,000 $10,000,000 $15,000,000 $20,000,000 |
$50,000 $250,000 $500,000 $1,250,000 $2,500,000 $5,000,000 $7,500,000 $10,000,000 |
$33,000 $167,000 $333,000 $833,000 $1,667,000 $3,333,000 $5,000,000 $6,666,000 |
$25,000 $125,000 $250,000 $625,000 $1,250,000 $2,500,000 $3,750,000 $5,000,000 |
$20,000 $100,000 $200,000 $500,000 $1,000,000 $2,000,000 $3,000,000 $4,000,000 |
| REVENUE REQUIRED TO COVER LOSSES | |||||
Sources and Citations
Federal Motor Carrier Safety Administration. “Revenue Necessary To Pay For Accident Losses” Accident Cost Table. 2010. U.S. Department of Transportation. (Cited: 1 Jan. 2011)