What is Your Experience Modification Rate?

By Meg Whynot-Young

Experience Modification Rate (EMR) is an annual rating from insurance companies that determines just how big of a risk your company is to insure. Your EMR rating can affect everything from how much your premiums are to being able to bid on contracts.

A neutral EMR is one, anything below one is good, and anything above one is bad. The EMR number is arrived at by determining an experience period, calculating the losses or claims in that period, considering risks in the industry, and total payroll amounts.  The EMR compares your specific payrolls and losses to the industry average losses for like businesses of a similar size.  Therefore, if your losses are the same as the industry average your EMR will be one.  A good EMR can save you quite a bit of money on your workers compensation policy.  If your company decides to change insurance carriers the new carrier will take a look at your historical EMR to determine how much of a risk your business is. So switching insurances will not help you hide a poor EMR.

If your EMR is high then you can expect that your premiums will be higher than others in your industry, and you could potentially run into trouble when bidding on government contracts. It is not unlikely that you could lose a bid simply based on the EMR of your company.

So how do you get to a lower EMR? This is a question you should be asking yourself no matter what your current EMR score is. In order to lower your EMR you need to reduce the number of injuries and claims. Proactive loss control activities are an important step in reducing your EMR.

So what loss control activities should you be implementing? Depending on how high your EMR rate is, you may need to get a third party loss control service involved.  For instance, under Code Rule 59, New York State requires employers with a payroll of $800,000 or more and an EMR above 1.20 get a consultation and evaluation by a certified workplace safety and loss prevention consultant.

If your EMR is not high enough to have raised any red flags with your state agencies, that is good, but it is not time to relax just yet. The end of the year is a great time to review your health and safety program, to schedule necessary safety training and refresher courses for your staff, and to conduct site audits to ensure safety protocols are being adhered to and safety equipment is in place and in working order. Drug testing employees is another way to prevent accidents on the job. Getting the support of management for loss control activities is key.  

The money you spend on safety has a significant ROI when you look at what you save on workers compensation costs, lost time from work, and potential OSHA citations.