How well are your motor vehicle claims being managed?

Accident Management is a service that has gained popularity since the early 1990's. It refers to the services provided following a motor vehicle incident, and should be a cost effective and efficient means of speeding up repairs and settling claims. Depending upon the provider, it can also include provision of rental vehicles, third party claims management, detailed risk analysis and mitigation services.

Over the last decade Australian business has become more relaxed about outsourcing functions that are usually dealt with internally. For example, Human Resources, Marketing and Accounting functions can now be partially or completely outsourced to external providers. Accident Management is another example where businesses that operate multiple vehicles can outsource the Accident Management Component.

Options for outsourcing

Accident Management is generally facilitated by Leasing and Fleet Management Organisations (FMO's), who predominantly outsource these services to yet another party, while marketing the service as their own. The actual service provider doing the work in this circumstance is an independent specialist. In Australia and New Zealand approximately 250,000 motor vehicles are managed this way. It is a case of outsourcing the outsource, with a client giving the management of their fleet including it's incidents to another party. This is a good approach if the party managing the claims has the necessary expertise and skill set to add value to both relationships.

Another method used predominantly by Australian businesses that self-insure or have an aggregate, is one that cuts out the middle man and has the client dealing directly with the independent specialist provider. Businesses such as Telstra, Australia Post, Avis and Coles do this for their motor vehicle fleets.

The rationale to outsource Accident Management is driven by a number of factors. Often businesses will place their underwriting (insurance) requirements with one insurer and the management of any future incident claims with an independent claims management specialist.

The extent to which a business will outsource their claims management will be dictated by the degree of their insurance cover. Fleets that have a low excess in place may only outsource their claims lodgment and analysis. Generally the degree to which the service is taken up expands as the excess increases. A full service arrangement is appropriate where an aggregate is in place or a fleet elects to self insure.

Why outsource?

Outsourcing Accident Management can provide some real cost and efficiency benefits to businesses.

  1. The provision of enhanced services and processes.
  2. A reduction in associated costs and resources.
  3. Improved turnaround and reporting.
  4. Indicator for applying appropriate mitigation services.

Potential service providers will need access to accurate records pertaining to a vehicles' history – running costs, claims, servicing and repairs. This is the benchmark that will serve as a basis for forecasting savings that can be made. By reviewing processes and supplier arrangements it is possible to achieve a minimum of 20% reduction in costs, including time savings. You may be surprised at how easy it is to achieve savings in this area.

One of the great advantages of outsourcing claims management to a specialized provider is having access to customized claims management and reporting software. Purpose-built software in the hands of someone that knows how to use it enables more detailed analysis and identification of trends pertaining to a fleet. Having the ability to interpret the data then provides insight to implement cost-saving changes to the business. Some service providers will also collect their own data against which can be benchmarked against your own to provide a broader picture of what could be achieved. When evaluating service providers, make sure you understand the systems used for analysis and reporting, and what the real benefits to your business could be. If done well, reports should provide a ready-made road-map for how to reduce your incident rate.

What does it cost?

The cost and type of the services required will be determined by the extent of the underwriting cover. Services on offer start with simple claims lodgment through to complete management and reporting of the entire process.

Pricing is usually calculated on the degree of service required and one or a combination of the following:

  1. A fixed cost per vehicle per month, ranging from $2.50 to $5.00 plus GST.
  2. A fixed cost per claim which may range from $90.00 to $275.00 plus GST.
  3. A flat monthly fee that includes the claims management and assessment charges. This is mainly used for fleets that require a set figure for budgeting purposes.

Where third party recovery is undertaken, a separate fee may be charged generally within 5 – 15% of the gross monies recovered. This will either be a percentage or a set dollar amount. Additional charges may include processing and administration fees.

As is the case with most intermediaries, Accident Management providers often receive additional revenue from the business they outsource on your behalf. In order to get a complete understanding of the arrangement and to assist with negotiations, ask potential providers if they receive a rebate or fee from Repairers, Assessors, Towing Operators, Rental Car providers, Administration providers or any other supplier that they allocate business to.

Being aware and factoring this into your discussions will ensure no surprises down the track.

Finally, for an outsourcing arrangement to work well, Business Managers need to be proactive in managing their provider. Keep them on their toes and push them to deliver the savings you need to justify the arrangement.

The Australian market place has a number of very credible Accident (Incident) Claims Management providers. Knowing what you want will help to secure a successful partnership.