By Mark Boada, Senior Editor
You recently released your annual Workforce Mobility Benchmark Report. What surprised me was that 31 percent of the 700 companies who responded to your survey indicated that they do not verify whether their reimbursed drivers have auto insurance coverage. That’s a shocking number to me – is it shocking to you?
Yes, it’s mind-boggling to me that nearly a third of surveyed companies don’t verify that their drivers have insurance, and that more than a third of surveyed companies don’t have a program policy at all. What’s more, there’s a close relationship between whether a company has a vehicle program policy and whether it verifies driver insurance coverage. Sixty-six percent of the companies we surveyed for this report have a program policy and verify insurance, but only three percent of the companies without a policy verify insurance.
Very often, the policies that we get to see as consultants are quite loose. A company might just say, “You need insurance,” but that doesn’t mean a driver has the right insurance for his or her needs, and it doesn’t mean the company has adequately protected itself.
You’d think that most companies understand that whenever a driver is driving on company business, negligent entrustment is an issue.
Negligent entrustment is something we end up talking about a lot with our customers. What’s concerning is that 80 percent of companies have more than one type of reimbursement program, but very few of them have any understanding of or control over the program’s costs or its policies. I believe that’s because the vehicle program is often so segregated from a company’s core business that companies don’t understand who’s ultimately responsible for the program, where negligent entrustment is relevant, or where the negligent entrustment line needs to be drawn. Nobody in the organization is stepping up to the issue and saying, “Hey, we need to fix this problem.”
The other thing that stood out for me was that companies can save 17.5 percent by using automated driver mileage reporting, and yet 51 percent are relying on manual paperwork processing. The biggest reported source of unhappiness with reimbursement programs is having to fiddle with the paperwork, so why do you think that is? Where is the disconnect?
For many companies, the fear of change is greater than the pain of status quo. They look at how they handle things and say, “Well, we’ll do what we can here to bend the rules, we’ll make an exception for this,” and just hope they’re protected, even if that is not the case. A good example of that is often seen with a sales team. I think we can all agree that none of them are going to be good at the administrative work. They’re never going to fill out a mileage log; they’re going to turn in a report that says, “This is how much I drove.”
What many companies do is say, “OK, we’ll let you do that, but you’re responsible for having a log,” but without actually verifying the log. We actually had a customer – a big retail organization of about 900 drivers – ask us to audit those drivers to find out how exposed they really were. About 90 percent of those drivers failed the audit. The company immediately did away with the manual processes they thought were protecting them and replaced them with technology.
I know that the prevailing notion is to not burden the drivers, and companies don’t want the drivers to think that Big Brother is watching them. With technology being so intertwined with everyday life, wouldn’t one think someone driving in the business world would more easily accept that?
You are 100 percent right. When I hear a company is concerned about “Big Brother,” one of the first things that we ask them is, “Do you already have that culture?” Employees understand technology. If the company gives you an iPad or smartphone, they can identify wherever you are if they want to. It’s similar to telematics, in that a company has visibility on where an employee is and what he or she is doing, so the “Big Brother” aspect becomes much less relevant with today’s technology.
If they’re afraid of change, it’s generally a cultural problem, because they’ve already instilled this fear of “Big Brother” in their employees and they’re afraid this might be the straw that breaks the camel’s back, when in actuality, it’s not. If the technology is done right, and if you’re using the right partner, there’s some privacy for the employee. On top of that, it removes the burden of a manual task, saving employees time.
While we’re talking about the automated mileage capture, tell me about your new Equo Fuel solution.
When it comes to covering fuel expenses, the two most common practices are to give drivers either a fuel card or a credit card. Very few organizations are doing it any other way.
At the same time, though, they all seem to have the same concerns and challenges: Is the fuel card being abused? How much personal fuel am I really paying for? Are my drivers filling up on Friday and Monday to pay for their weekend fuel expenses? Companies are starting to recognize these potential issues, but they’re not sure how to handle it, and that is where Equo Fuel comes in.
Equo Fuel allows a company to customize fuel reimbursement for their employees, so that every business mile is reimbursed and no personal miles are. Instead of using a fuel or credit card, drivers are reimbursed based on the type of fleet vehicle they used, the market they serve, and any other information relevant to that particular vehicle.
So, basically, the drivers buy their own fuel on their own personal card, and then through Equo Fuel, they’re reimbursed based on all the data you’re capturing, right? And you’re also capturing their fuel use?
Correct. We’re capturing the business miles that they’re driving, and reimbursing them based on their vehicle and geographic location. We track exactly how much it’s costing them to fill up their vehicle in a given month in a specific area of the country, and, at the end of the month, he or she is reimbursed for every business mile they drove. This allows a company to accurately reimburse drivers for all the work they do in the car.
On the flip side, some companies give people a fleet vehicle and they may only drive a few thousand miles a year for work, but put 20,000 personal miles on the vehicle. Equo Fuel allows a company to separate those miles, reimburse drivers fairly, and avoid the tax consequence it needs to maintain and settle at the end of each year. It’s very hard to control and monitor these expenses without the type of technology Equo Fuel uses.
Beyond reimbursement fleets, can Equo Fuel stand on its own as a program that works for company-owned or -leased vehicles?
Absolutely. Equo works for both kinds of fleets, allowing a company to cover business fuel costs without putting more administrative work on the driver.
A company with a reimbursement program will use Equo to capture driver mileage, so the entire reimbursement will be based on that. A company with a fleet won’t give out a fuel card, instead using Equo to capture the business mileage. A driver will be reimbursed for business mileage based on what the price of fuel is and their specific fleet vehicle, and will be responsible for personal-use fuel.
Additionally, there is business intelligence that comes from using Equo: better visibility on how each vehicle is being used. Where are employees spending their time? How much are we seeing our clients, and when we’re there, what is the outcome of those visits?
What are the results of the Equo Fuel beta tests you’ve been running?
I’m going to have to get back to you with precise numbers, but I can tell you very comfortably that the range is between a 20 to 30 percent reduction in fuel spent.
Do you have any competitors with this particular program?
Not that I’m aware of. There are other mileage capture applications out there, but their approach is different: Companies use these apps strictly to understand business versus personal mileage to calculate the proper fringe benefit tax at the end of the year. But that doesn’t solve the fundamental issues of appropriate fuel usage and spending the right amount of money, versus reimbursing someone to use the car personally all week. That visibility isn’t possible with any other type of solution, and with other mileage capture applications, you’re still managing a fuel card.
I’ve helped organizations get fuel cards in the past, and even with the most locked-down programs, there’s still always a way to cheat. One of our client organizations once received a phone call from an 18-year-old gas station attendant who said, “Hey, one of your employees has been here all day.” That employee was using the fuel card to fill up other people’s cars and charging them $20 each, while never exceeding the maximum allowable 20 gallons per fill-up. When the company investigated, they found there was another employee doing the same thing, and, in two months, those employees had rung up $400,000 in fuel expenses they were pocketing as profit.
Nothing triggered the system that this was going on until they finally got the bill?
Even the bill wasn’t a red flag. This company has thousands of vehicles as well as tractor-trailers, so they’re used to very large fuel bills. So, a two-month bill of $400,000 could fly under the radar in a fuel expense, because quantity of fuel per fill-up was never exceeded. This would have gone unnoticed if it wasn’t for a diligent 18-year-old working at the gas station who said, “Something’s not right about this.”
What surprised you about the report and what kind of feedback have you received?
What we’re really excited about in this year’s report is the breakdown of findings by the individual industries. Another key part of the report examines companies with multiple programs to show the need for standardization. We’re having a lot of conversations with companies about whether their drivers have the proper insurance, who is checking driver motor vehicle records, and who is going to help them with that. A lot of our partners are expanding the way they manage their programs.
How do you see ride sharing impacting fleets, and how does Runzheimer support your clients with ride sharing?
The fleet industry’s changing so much, and as ridesharing continues to expand, it’s going to impact the fleet world. While I can’t specifically talk about what we might be doing in the Uber world, we do know that we’re having to make some changes related to ride sharing – for example, if a driver has partial ownership of a vehicle, or if there is a vehicle that five different sales team members can access and are all equally responsible for.
For Runzheimer, it’s no different than understanding exactly how fixed and variable reimbursement works and adjusting to the needs of the workers based on how they interact with that vehicle. Some people need the vehicle more than others, so they should be entitled to more money in those instances because they’re going to incur a higher cost.
Do you see a trend already emerging in fleet ridesharing? Perhaps fleets are taking a look at their vehicles and saying, “Well, if he’s only driving 4,000 miles a year, even though that’s part of the deal, why aren’t we utilizing that vehicle in other ways?”
We’re seeing some movement in that space with manufacturers. I know Ford was starting to allow people to split ownership with some of their leases. It’s not happening on a very wide scale, so businesses are not truly making adjustments for it yet, but conversations about it are finally starting to take place.
Where are the opportunities in the future for Runzheimer or for companies like yours?
I believe there’s an amazing opportunity for a fleet organization to truly understand the expense associated with the vehicles and, if done appropriately, get a better handle on fuel expense management and provide even more benefit to drivers.
For example, if a fleet company would like to reduce fuel expenses by 10 percent and the average vehicle’s fuel costs a thousand dollars a year, they need to save $100 a month. Rather than a company taking that full $100, it now has the opportunity to provide better vehicles for the same cost. Maybe the company no longer has to issue a Ford Fusion with cloth interior; maybe they can upgrade to a Taurus with leather interior, because now they only are responsible for the business cost of it using our fuel reimbursement application.
The question fleet companies need to ask is whether they truly understand their business fuel costs versus their personal. We can help fleet companies with that, and give them more opportunities to use their savings as well. We’ll continue to focus on what we do for business intelligence and the application’s capabilities, and show how companies can truly use that data to make more informed decisions as an organization.
Telematics tells you what to do with your fleet vehicle and how to maintain it, but to understand what’s happening in the field, what clients a sales team is seeing, the true business side, and, potentially, the revenue-generating side of the organization, is not coming from telematics or a manually created log. Runzheimer can provide that information through our application so that companies can put an actual plan in place. That capability is becoming more and more important to the organizations that we serve.