Insurance Fleet Strives for Safety & Value

First established in 1894 in West Bend, Wis., West Bend Mutual Insurance Company (WBMI) provides property and casualty insurance to residents in 11 Midwest states. Along with the company’s mission statement of “providing peace of mind to its customers through sound insurance and exceptional service,” it also strives to be the company of choice for associates, agents, and policyholders.

With more than 1,000 employees and close to $800 million in revenues for 2012, the company operates 135 licensed vehicles, including GMC Terrain, Dodge Grand Caravan, Buick LaCrosse, and Ford Taurus models, plus six off-road units. All of the fleet vehicles are E-85 capable, and a number of the off-road vehicles are powered by electric or diesel.

Regional sales managers, claims damage appraisers, loss prevention specialists, and special investigators utilize these vehicles in the course of their work. Off-road vehicles are used to maintain the company’s 160-acre HQ campus, eight acres of which include lawns, sidewalks, and parking structures. The balance of the acreage was turned back into a natural prairie, very similar to what it would have looked like 150 years ago. In addition to prairie grasses and plants, the site features more than 10,000 trees, a planting process that started more than 25 years ago.

Internal Partnerships Ensure Fleet Financial Compliance

For more than 20 years, Tom Krause has led the WBMI fleet. As purchasing/fleet manager, Krause purchases goods and services for the company’s home office, two subsidiaries, and associates working remotely in 11 states. He also handles the non-executive portion of corporate travel requirements, maintains fixed asset information, and manages the entire fleet operation.

“The fleet operation is located in the financial division on paper, but, in reality, it is a part of virtually every department of the company,” Krause said. “Like all organizations, I need to be mindful of expenses. But, at the same time, I need to constantly recognize I am providing an asset that has to allow my associates to both safely and efficiently perform their duties, while projecting a proper image to the public.”

Krause partners closely with Heather Dunn, assistant vice president – corporate accounting, who reports directly to WBMI’s CFO.

Dunn leads the accounting department, which includes producing all financial reports (internal and external), managing accounts payable functions, and overseeing investment and tax accounting.

She also oversees the purchasing and fleet management side of the business and participates in ongoing strategic initiatives, including a recent data warehousing effort and a major compliance aspect, called the Model Audit Rule.

“Heather and I sit down regularly and go over any fleet issues or concerns,” Krause said. “Each year, I present my suggestions for the model-year, and we discuss how these may affect the budget. There have been no major changes in the past few years with the vehicles, but, after some research, we found there may be a comfort feature that we can add to enhance residual. The added benefit is it will not only look good when we dispose of the vehicle, but our drivers will benefit from it as well.”

Krause also partners with middle management, which has close involvement with company drivers, so their budgets reflect specific fleet expenses. They are also more likely to know about specific individual needs or concerns.

“I have been very fortunate over the years that most managers have supported my decisions and have been in my corner with dealing with any problems,” Krause stated.

He also explained that being part of the “financial family” helps him ensure that fleet financials stay in line with company goals.

“I rub elbows with the people in charge of the budgets daily,” Krause explained.

Fleet Management Keeps the Numbers in Mind

As a part of his annual year-end accounting, Krause compiles a list of incoming and outgoing assets, including vehicles. And, while he can predict some costs with a fair amount of accuracy, such as purchasing and insurance costs, other areas are more fluid, including anticipated service, residuals, and lube oil filter (LOF)/oil change.

“Then there are some cost predictions that require a little faith — fuel costs, out of pocket (OOP), accident costs,” Krause explained. “These are all items I place in the forecast numbers and track to see how lucky/insightful I was.”

He added that one variable remains hard to pin down: the number of drivers. As the company experiences growth and expansion into new territories, Krause must keep vehicles at the ready for new drivers. Unfortunately, he may not always be the first one to find out about the plans. But, using some of his deductive skills, Krause is able to plan his budget effectively.

“By nature I am a numbers guy, and by heredity I am a car guy — my father was a car dealer,” he explained. “Combine these two attributes and the result is that I take a very personal interest in the fleet. This interest typically doesn’t allow much room for surprises.”

Krause added that he is extremely fortunate that his management team objectively views his carefully researched recommendations.

The WBMI Fleet Aims to Keep Drivers Happy

Operating a relatively small fleet, Krause personally meets most of West Bend’s drivers and develops a rapport with them. Even those located farther away regularly communicate with him or exchange e-mails. This direct connection helps build a trust and support that may be lacking in larger fleets.

“We put significant thought and energy in selecting a vehicle for our associates,” Krause said. “Their office is a 2-ton vehicle. Just as not every work station or office is ‘one size fits all,’ we need to accommodate various needs of the drivers.”

For instance, Krause has one driver, in particular, who is very tall. And, he knows each time this driver gets a new vehicle, a shop must add a special track to the seating that enables the driver to sit comfortably while driving.

“It is unlikely I will get any additional money for this unit when it comes time for disposal, but having the driver be comfortable is priceless,” Krause stated.

Today, most WBMI vehicles come equipped with many safety features that were added options years ago. But, early on, the company recognized the benefit of these features and elected to pay the extra cost for the security and safety these features offered.

While Krause pointed out that the fleet department may have recouped some of the expense at the time of resale, he also explained that there are some things you can’t put a price on.

“When I get one of those dreaded messages that one of the drivers was involved in an accident, the first question is if everyone is okay,” he stated. “When I am told the vehicle looks pretty ugly, but everyone in our vehicle is fine because of the safety features — that is a complete return on the investment. Or, when I am contacted about the heavy rain or snow that a driver experienced, and how he or she made it safely due to AWD, ABS, traction control, etc., that makes it worth it.”[PAGEBREAK]

General Rules, Selector Lists & Current Challenges

As a general rule, WBMI vehicles run 70,000-75,000 miles. Fleet operations pays for all fuel, maintenance, and service on the vehicles. When it reaches time for replacement, the driver receives a selector list of the vehicles for that model-year.

“Over the years, we’ve closely watched market trends and strived to option the vehicles with not only an eye on the comfort and safety of the driver, but also what the popularity of the vehicle will be two or three years down the road when it comes time to sell the car,” Krause said.
Fleet purchases a majority of the vehicles from dealerships that are policyholders with WBMI and share the same civic-minded philosophies that the company follows.

“When you look at where some vehicles are assembled, it is not as clear anymore what is American and is imported,” Krause stated. “We view the Big Three out of Detroit as being the American-made cars and create a selector list from those nameplates.”

When asked about the most challenging part of WBMI’s fleet, Krause cites fuel costs as always being the wild card.

“Someone sneezes at a refinery and the gasoline prices spike overnight. I can’t go to the big oil companies and ask for price reductions, but I can instruct my drivers to drive smarter,” Krause said. “And, I can give them smaller engines/cars (to a point).”

He also added that he polices the company’s fuel card provider for any additional savings it may offer. He also takes the time to talk to his factory reps about any additional money they can save the fleet.

The WBMI Fleet Relies on Best Practices & Research

The WBMI fleet has moved from six- to four-cylinder engines in the fleet’s most popular vehicles. Krause realized immediate savings by not having the up-charge for the larger engine and saved instantly on fuel costs. And, most drivers didn’t even notice a difference in vehicle performance; however, when a few drivers voiced some concerns, Krause did some research.

“Most everyone either remembers by first-hand experience or from talking to someone that the ’70s put an end to the horsepower race and the legendary muscle cars that roamed the roads,” he said. “A hot car of the ’80s maybe had 185 hp with a 3-speed automatic — and all of this came out of a V-8. Most four-cylinder engines today produce 185 hp and have a 6-speed automatic and a vast array of computers. When I tell the drivers their vehicle outperforms a sports car from 30 years ago, they get the picture.”

Other fleet best practices employed by Krause include providing drivers with such items as Bluetooth and built-in navigation as part of the offered standard package of features, use a of fuel card, encouraging drivers to check tire pressure routinely, adding an Eco option on vehicles that alters the shift points and increases mpg, and constant monitoring of hybrid performance.

“We have purchased hybrids and will continue to monitor their results and closely watch as technology continues to advance,” Krause stated. “All of our vehicles are E-85 capable. With each new development, we look at the feasibility and practicality for our fleet. As advancements go from the drawing board to mass production, if it makes logical sense, we add it to our fleet.”

Each year, Krause also deals with the OEM factory reps to lock in rebates and factory money. He explained that as models change or get a face lift, the money from year to year may change. This change can influence the models placed on the selector list each year.

“And, of course, our requirement to have safety features on our vehicles may require a change to a particular model edition to get a certain package/feature,” he added. “These changes may have an effect on my final purchase cost, but generally the increase in future residual value will ultimately offset these added costs.”

Several years ago, Krause created a spreadsheet that included every cost associated with assigning a vehicle to a driver. He determined that each year his cost per mile averages fell well below published national averages. A large part of this was due to the mixture of his fleet vehicles and their residual values.

“Starting back in the late ’90s, we began purchasing portable GPS units for certain drivers in the claims area. This was still during the dark ages when a glove box actually held folded road maps,” Krause said. “The response by the drivers about how much more efficiently they were getting from one account to another using the GPS was astounding. Now I have this feature built in from the factory for most of my vehicles.”

Fleet Ops Finds Vehicles that Generate Better Resale Value

Over the years, Krause has seen many auto manufacturers become known for their proverbial “salesman” vehicles. At these times, the cars filled the role as the go-to fleet car for business and also for rentals. And, while they may have been fine cars, according to Krause, they became a dime a dozen on used-car lots when they’ve reached 75,000 miles.

“They filled the role nicely and were fairly economical to buy new, but were horrible on resale,” he explained.
Krause decided to take action. He conducted extensive research and found there were other vehicles well suited for the company’s fleet that would hold more residual value.

“I plotted and I figured. I made graphs, and I made some leaps of faith. Then, I presented it to my upper management team,” Krause said. “They listened to me, they absorbed the data in front of them, and they agreed with me.”

Then came the easy part, he stated: buying some vehicles not known as the typical fleet car. The hard part was waiting two years for these vehicles to run their cycle and find out if his research would prove true.

“Fortunately, it did. I was relieved and my management team was glad to see the higher residuals. And, just as important, the drivers were very happy to be driving a car that they may have actually considered buying,” Krause said.

Krause Reflects Back as he Moves Forward

As the WBMI fleet continues to grow and reach into new territories, Krause takes time to reflect back on the state of things since he arrived at the insurance company more than 20 years ago.

“The world around us is rapidly changing, and fleet is no different,” he said. “I look back at the vehicles that I was purchasing 21 years ago, and I just shake my head about how much they have changed.”
He also suspects he will be able to say the same thing looking back in another 20 years.

“I need to be vigilant on getting the best value for the money I spend. I don’t need to get every option possible on the vehicles, but I need to make sure I am getting the safety features and comforts that best equip my drivers to perform their duties,” he explained.

Future predictions from Krause include: Electronics and computers will continue to play an important part in the automotive realm, and safety features that were unheard of or seemed to be something straight out of science fiction will become reality.

“Our fleet has basically tripled in the 21 years I have been managing it. WBMI is keenly aware of what we do well as a company. We continually win awards for “Best Places to Work.” With that said, I see no reason to think we won’t continue to offer vehicles to our drivers that they are proud and eager to drive,” Krause concluded.