Accident Recovery: How Much Revenue Do You Need to Recover from an Accident?

Any motor carrier who has experienced an accident will confirm that the cost of such an event far exceeds the deductible they were required to pay per the terms of their cargo or physical damage policies.  But are you aware of all the costs that may be associated with a loss?  And have you ever considered just how much revenue it will take to truly recover from the loss?

 

Accident costs take the form of direct and indirect.  Examples of direct costs include: cargo and vehicle damage, injury and medical costs, loss of revenue, administrative costs, police report, possible impact on truckers’ package policy and workers’ compensation insurance premiums, and costs associated with the towing and storage of damaged vehicles.

 

Examples of indirect costs include: loss of clients and sales, lost time at work, costs to reschedule meetings, salaries paid to employees involved in the accident, cost to hire, train or replace employees, supervisor’s time, loss of personal property, replacement vehicle rental, downtime for damaged equipment, depreciation of equipment, negative publicity, increased public relations costs and government agency costs.

 

With these direct and indirect costs in mind, the Federal Motor Carrier Safety Administration developed a table outlining the amount of revenue it will take a motor carrier to recover from losses ranging between $1,000 and $200,000 based upon the yearly profit margin the motor carrier earns (1% – 5%).  As an example, in the instance of a $25,000 loss and a 2% profit margin, the motor carrier will need to generate $1,250,000 in revenue in order to fully recover from the loss.  In the case of a $200,000 claim and a 3% profit margin, the motor carrier would need to generate $6,666,000 in additional revenue to recover from the loss.

 

While it may not be possible to put an end to all losses, it is important to keep these costs in mind when managing your claims and training your employees on safety procedures to reduce claims.  We at the Navigator Truck Insurance Agency want to help.  Please call our office today at (800) 596-TRUCK (8782) if you would like assistance in evaluating your claims history to identify patterns or trends that can be proactively addressed to reduce the likelihood of recurrence.  At the Navigator Truck Insurance Agency we work hard at being accessible, helpful and result oriented.

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