By Nate Kohn
Workers’ compensation is probably the largest part of your insurance premium. In Wisconsin, the workers’ compensation code we use for snow plow drivers is 9402 - street cleaning. The rate is 10.35%.
So what is a “mod” factor and what is its effect on the comp rate? Each company is given a mod factor. The baseline mod factor insurance companies will start with is 1. A mod factor of 1 simply means your workers’ comp loss rate was as expected or average. A mod factor of 1.2 would mean your comp loss rate was more than expected and a surcharge would be added to your premium. A mod factor of 0.8 would mean your comp loss rate was less than expected and a credit would be applied to your premium.
Let’s say you spend $100,000 (9402 - street cleaning) on snow plow driver wages this winter. At 10.35% you would spend $10,350 in workers’ comp. If your experience mod factor is 0.8 you would receive a $2,070 credit to your policy. If your mod factor is 1.2 you would be charged an additional $2,070 on your premium.
Experience modification factors are calculated using loss and payroll data. Typically, the data used is the previous three policy years, excluding the most recent completed year. The experience modification factor is influenced more by small, frequent losses than large, infrequent ones.
Your insurance agent will be able to get you your experience modification rate.
Keep it low
The following steps can be taken to lower your mod rate:
- Provide employees with safe equipment.
- Develop and implement a safety training program for all new hires.
- Report all claims immediately.
- Avoid hiring and fire accident-prone employees.
- Schedule regular meetings with employees to discuss safety.
- If an accident should happen, provide a light duty job to the employee to get them back to work.
- Implement safety performance goals.
- Consult with your insurance provider. They will likely have a risk management person that can make recommendations based on your specific account.
In business, every penny counts. Managing your experience modification rate is just one way to lower your operating cost and put more money into your pocket.
Nate Kohn owns Nate’s Landscape Co. in Belgium, WI.