In the face of a mounting surge in accidents, FedEx finds itself grappling with a nearly tripled insurance expenditure over the last decade. This concerning trend has prompted the shipping giant to exert substantial pressure on its delivery contractors to substantially enhance safety measures.
The firm’s response involves implementing a series of stringent requirements for contractors operating within its ground division. A confidential memo obtained by our sources reveals that FedEx is mandating the installation of on-board cameras and sensors in the vehicles of contractors, coupled with intensified training initiatives. Additionally, the memo stipulates that contractors shall be subjected to financial penalties should the incidence of accidents exceed predefined thresholds. Such measures are part of an overarching strategy to bolster safety and consequently alleviate the weight of rising insurance costs.
At the heart of this initiative lies the strategic vision of FedEx’s Chief Executive, Raj Subramaniam, who is steering efforts to seamlessly integrate the company’s ground and express divisions into a cohesive network. Fundamental to this transformation is a revamped focus on safety enhancements. Notably, the express division boasts a better safety record, marked by fewer fatal accidents, attributed in part to the direct employment of drivers and ownership of trucks.
Amid this backdrop, the surface operations sector, involving around 6,000 delivery and big-rig contractors, has been implicated in a staggering 89 fatal accidents across the United States within the preceding two years, according to data from the Federal Motor Carrier Safety Administration as of August 2nd. In stark contrast, FedEx itself recorded seven fatal accidents within the same time span.
The company’s main competitor, United Parcel Service Inc. (UPS), likewise contends with a significant tally of accidents, reporting 66 fatal crashes during the comparable timeframe, even though UPS drivers log more miles.
Unquestionably, these safety concerns have not left FedEx’s financial performance unscathed. As revealed by the company’s records, the fiscal year culminating on May 31st witnessed FedEx earmarking over $5 billion for self-insurance reserves—marking the first instance of crossing this significant threshold. This figure starkly contrasts with the $2.47 billion recorded in 2017 and the $1.8 billion a decade prior. As it stands, FedEx Ground provides insurance coverage to its contractors, who bear the deductible.
In contrast, UPS, delivering nearly 60% more packages than FedEx, reported self-insurance reserves amounting to $2.9 billion for the preceding year—a modest increase from the $2.8 billion documented ten years ago, as per company documentation. It’s worth noting that prominent carriers such as FedEx and UPS often adopt a self-insured model, involving the allocation of reserves to meet potential claims, rather than opting for conventional insurance coverage.
In response to inquiries from Bloomberg News, FedEx emphatically stated that “safety is paramount in all aspects of our business,” and underscored its commitment to inculcate this ethos within its contractors.
A spokesperson from FedEx further iterated, “By implementing initiatives that promote the use of technology and increase the visibility of security outcomes for service providers, we are supporting an environment of continuous improvement, increased visibility, and accountability to ensure that security remains central to everything we do—top priority,” as conveyed in a written statement.
This impetus toward enhanced safety was notably emphasized during a recent meeting with contractors held in Orlando, where senior FedEx executives reaffirmed their unwavering commitment to safety. In this vein, an emphasis on technology adoption was articulated as a pivotal means to curtail the proportion of accident-prone miles. Clarence Dozier, FedEx’s Vice President of Ground Safety, expressed that the imminent implementation of an artificial intelligence-based system holds promise in detecting driver distraction and disseminating real-time alerts—an initiative to further fortify the safety landscape.
“It’s clear that safety technology helps reduce accidents,” Dozier underscored, as evident from an audio recording of a FedEx event shared with Bloomberg in early August.
However, a nuanced perspective emerges from over a dozen current and former delivery contractors who contend that despite technological and monetary incentives to enhance safety, FedEx has not addressed the underlying challenge of high driver turnover, which bears the potential of exacerbating the accident frequency. These sources, requesting anonymity due to the confidentiality clauses embedded within their contracts, have emphasized that many accidents occur during the nascent months of a new
