To pay a fee or not to pay a fee? In fleet accident management, that is the question.

Outsourced fleet accident management has been available as an alternative to in-house and Insurer claims departments for nearly thirty years. The industry prevails for many reasons but now exists in different forms and with different interests.

In theory the service should be tuned according to the fleet’s priorities, provide more transparency (with which better decisions can be made) and also save everyone both time and money. In practice, the service is very often inflexible, income streams are hidden and the scheme is not set up to add value along the whole chain.

Furthermore, fleets who buy the service need to be aware of the fundamental differences that exist between a zero fee scheme and one in which the scale of the income receiveable by the service provider is both known and controlled.

Levels of transparency 

In the case where a fleet chooses to pay a fee for fleet accident management, it is reasonable to expect the service provider to really focus on lowering the cost and frequency of claims. This is because rebates and commissions paid to the service provider (in exchange for volume) can be set at a level that will not inflate the charges made.

Objectives can thus be aligned and both supplier and customer are pulling in the same direction. In the case where a fleet chooses a zero fee scheme, the principle of deriving income from sub-contractors is understood although very often the scope and scale of that income is not.

Of course, the fleet also has less room to complain about charge levels if the scheme is ostensibly ‘free’. The issue here is that very often there are no constraining factors on the scale of commission paid because it is hidden in a contract between the accident management provider and its sub-contractor and by consequence the more claims-related transactions there are, the more income is available.

Potentially, in this instance, objectives are therefore not aligned and conflict emerges as the service provider seeks income and the fleet seeks savings.

Warning Signs 

Sadly, not all fleet accident management providers offer the same transparency and service as we do. One of the greatest challenges for fleet managers is in understanding how and why this might impact them. First let's tackle the anwer to "why".

For most fleets no news is regarded as good news. In other words if the scheme doesn't create complaints and requires little intervention, most fleets regard it as a success. This is despite the fact behind the scenes the scheme may be out of control. That brings us neatly to "how" lack of transparency can impact a fleet.

The following points should provide food for thought:

• Recently we wrote an article on the importance of measuring average repair cost which suggested that, as a metric, a fleet could use it to identify if your choice of accident management supplier was wise.

• Other visible indicators might include how flexible your supplier is in choosing sub-contractors (such as repairers, hire companies, solicitors and recovery agents).

• Clearly management information is useful when examining how the fleet ‘behaves’ but claims reports are often quite poor in showing how the supplier (and its sub-contractors) has ‘behaved’.

• Does the fleet enjoy the benefit of co-operation between its Insurer and its accident management supplier? If these parties are frustrating each other then the only loser is the fleet itself – as premiums rise.

• Fleets expect their supplier to recover uninsured losses where there appears to be an opportunity to do so. Lack of transparency could be shrouding poor performance in establishing liability, lack of assertive recovery techniques or indeed slow reimbursement of cash to the fleet.

Zero Fee Mechanisms 

The points above make for grim reading for those fleets that enjoy a zero fee arrangement but are not sure if that benefit creates an unacceptable compromise in terms of what they end up paying. Here at RVM we understand how and why the zero fee mechanism has flourished and we appreciate that fleet managers need options if there’s no budget for fees but still a need for the service.

Due to lack of transparency, fleets go into zero fee arrangements thinking rebates and commissions payable to the service provider will be set at levels that simply compensate for the lack of a fee. In reality the income represents a level of compensation that may go well beyond that.

Nobody wants nasty surprises in business because it means someone should have known what was happening and therefore the fall-out from it is usually serious. For that reason, we believe true transparency is mandatory if your goal (as an accident management provider) is long-term contracts with fleets who value the benefit of knowing exactly what’s going on. Ethical business practice is the cornerstone of our organisation.

How transparent is your accident management service? Contact us for an evaluation.