Managing the Financial Side of Commercial Fleets

Chubb Group Offsets 27% of Its Fleet Expense in 2012

By adapting a quick replacement strategy, Chubb has seen a significant savings in operational costs. The company is also assessing telematics and a scheduling system for pool cars to provide insight into usage patterns.

May 2013, by Cheryl Knight - Also by this author

Sheri Bonsall, assistant vice president and manager of employee mobility for Chubb Insurance (center), and the fleet team ensures that fleet stays in line with company goals via quarterly reviews with its fleet management company and monitoring of key monthly reports.
Sheri Bonsall, assistant vice president and manager of employee mobility for Chubb Insurance (center), and the fleet team ensures that fleet stays in line with company goals via quarterly reviews with its fleet management company and monitoring of key monthly reports.

For more than 130 years, Chubb Insurance has delivered property and casualty insurance products and services to businesses and individuals around the world. Today, the company is the 12th-largest property and casualty insurer in the United States, according to the company, and it offers a worldwide network of some 120 offices in 26 countries staffed by 10,200 employees.

The Chubb Corporation reported $52.2 billion in assets and $13.6 billion in revenues in 2012. And, according to Fortune magazine, the company is the 202nd largest U.S.-based corporation. The company has emerged as a leader in the insurance industry as a result of its size and longevity, but also thanks to its mission of consistently building lasting relationships with customers and 8,500 independent agents and brokers.

“We aim to be the best at what we do by delivering unparalleled service and innovative, scalable, and specialized products backed by financial strength and third-party endorsements,” said Sheri Bonsall, assistant vice president and manager of employee mobility management, which includes corporate travel, meeting & event services, and executive chauffeurs. She also represents Chubb as a board member of the Network of Employers for Traffic Safety (NETS).

Bonsall took over fleet operations in 2004, and since that time she has found new ways to minimize fleet costs while providing cost savings to the organization. Bonsall relies on her background in business management and accounting, as well as her partnership with her fleet management company.

Focusing on Driver Safety & Comfort

The company’s leased fleet of 750 sedans and small SUVs, mostly comprised of Ford models, are used by adjusters to evaluate claims; appraisers and loss control associates to evaluate insured or potential clients; and marketing and underwriting to visit agents and brokers.

The fleet team of two — Bonsall and Sandra Williams, fleet administrator — work daily to fulfill the department’s mission to provide safe, economical vehicles that are attractive to drivers.

“Driver safety is our priority and driver comfort our obligation. We aim to provide the safest, well-equipped vehicles available, while being mindful of our expense-reduction expectations to the organization,” Bonsall explained.

The company’s fleet policy is extremely thorough, and, to ensure the department’s continued efficiencies, Chubb has assembled a cross-functional sounding board that provides ongoing review of fleet policy. This ensures that the policy remains up-to-date and addresses new issues as they arise, such as distracted driving. According to Bonsall, a key fleet best practice includes maintaining a nimble, flexible management style that allows the team to adapt quickly to factors affecting the department, including turn-in parameters and modifications to the selector.

“We also have a strong communication plan with drivers to remind them of policy and key dates,” Bonsall added.

Aligning Fleet Financials

Bonsall partners closely with senior management when assessing fleet financials. The fleet team ensures that financials stay in line with company goals through quarterly reviews with its fleet management company and monitoring of key monthly reports.

“Our hard dollar savings and cost avoidance data is part of Global Strategic Sourcing’s overall savings target,” Bonsall stated. “We forecast the numbers for inclusion into this target, which is a large part of our overall performance goals.”

When assessing fleet financials, the factors Bonsall takes into account include:

  • Total cost of the fleet.
  • Cents per mile (cpm).
  • Equity position.
  • Resale market conditions.
  • Benchmarking data.
  • PM compliance.
  • Fuel expense (as older cars cycle off, what is the cost benefit of newer, more efficient vehicles).
  • Remarketing data.
  • Vehicle selection and its impact on cost.

Breaking down fleet cost components into logical categories is key to determining what expense levers can be addressed for the most immediate savings impact.

New Initiatives Key to Fleet Operations

For the 2013 model-year, Chubb engaged in a vehicle strategy aimed at further reducing fleet costs by offering the Ford Focus SE with an upgraded equipment package (201A) as an attractive alternative to the Fusion.

The upgraded package included features never before offered on fleet cars, such as leather seats and interior ambient lighting, to entice drivers to select the smaller, more fuel-efficient vehicle, according to Chubb.

“We had a 4-percent increase in the selection of the Focus and anticipate higher participation as the vehicles are delivered and the benefits are socialized,” Bonsall said.

Another recent change in the fleet’s operation centers on adapting a quick replacement strategy in which vehicles recycle at 45,000 miles, resulting in:

  • Positive resale gains, which, for 2012, effectively offset 27 percent of the fleet’s operating cost.
  • Strengthened equity position; Chubb vehicles are breaking even at around eight months, exceeding industry averages of 12-18 months.
  • New vehicles have reduced maintenance expense by 26 percent and improved average overall fuel economy by 1.7 mpg.
  • Strong performance over the benchmark group (other insurance like-type fleets) of 6 cpm.

Chubb has a tiered depreciation approach based on monthly vehicle mileage. There are mileage tiers; the higher the monthly mileage, the higher the amortization rate.

“Our drivers are very pleased with our vehicle choices and have embraced and supported our efforts,” Bonsall stated.

Utilizing Technology Effectively

Utilizing state-of-the-art technology helps the fleet team streamline processes, including accessing it’s fleet management company’s fleet management system. This system automatically e-mails drivers a reminder when they are due for preventive maintenance, imputing personal and business mileage, etc.

“Many drivers have downloaded the driver facing mobile app, which provides them with information on discount maintenance shops and fueling stations,” Bonsall stated. “It allows them to update business and personal mileage, etc.”

The ease of use of the app and reminder system keeps the drivers informed and highly compliant to the preferred supplier network, preventive maintenance schedules, and keeping body and paint (B&P) records up-to-date. Ultimately, this saves a significant amount of time and money for both the fleet department and drivers.

Moving forward, Chubb’s fleet team will continue to try to craft policies and procedures that elevate driver productivity and reduce operational costs. Bonsall is working with her fleet management company on several items that are expected to produce positive results.

These measures include telematics and a scheduling system for pool cars to provide insight into their usage patterns. Other initiatives include ongoing assessment and improvement of fleet safety program, taking a closer look at violations, and providing automation for employee purchases.

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