What is my Experience Modification Rating (EMR)?
The Experience Modification Rating has several names, including experience rating, experience mod, and EMF. But your experience modification Rating is simply your company’s safety score in reference to your workers’ compensation insurance coverage.
If you want to lower your workers’ compensation premium, start by learning about your experience mod. That is because your premium is, in part, determined by your EMR rating which can be managed and improved.
What is the Experience Modification Rating?
Your experience mod is a numerical representation of your WC claims history. It is the ratio of the costs of your company’s actual workers’ compensation claims compared to the expected costs for companies of equivalent size in the same industry. It can be either above or below the industry average of 1.0. Above 1.0 means your claims history is worse than the industry’s average for workers’ compensation insurance while below 1.0 means it is better.
How is an Experience Modification Rating Calculated?
Your experience mod is calculated by the National Council on Compensation Insurance (NCCI) or your state’s workers’ compensation rating bureau. It is a formula that considers the ratio between expected losses in your industry and the losses your organization actually incurred, as well as both the frequency and severity of those losses, and is used to determine your experience mod. An organization with one large loss will be penalized less severely than a company with numerous small losses because a higher frequency of claims is an indication that you may experience additional losses in the future.
How Does My Experience Modification Rating Affect My Premium?
Workers’ compensation base premium is calculated by multiplying rates based on payroll classifications and the hours worked by those classes. The base premium is then multiplied by the experience mod. An experience mod less than 1.0 creates a credit while an experience mod greater than 1.0 creates a debit.
How Do Experience Modification Ratings Benefit Employers?
There are two primary benefits of these EMF ratings. First, the rating process tailors the cost prediction and net premium cost to the individual employer more closely than the manual rating alone. In other words, the experience mod represents a refinement in the premium determination process. It does so by comparing the industry average experience with an individual employer’s own experience. It benefits employers by adjusting the premium cost, which is the best indicator of an individual employer’s own potential for incurring losses. By using these insurance principles and an employer’s own payroll and loss data, the insurance premium will be appropriate for the coverage provided.
Secondly, it provides added incentives for loss reduction that are absent from the manual rating. Since the experience mod gives individual employers some influence over the premium they pay, it encourages employers to develop loss prevention programs. It also encourages them to return the injured employees to work as soon as reasonably possible. Simply put, the experience mod promotes health and safety in the workplace.
When Can I Expect to See Changes in My Experience Modification Rating?
The most surprising part of the experience mod is the delay between the incident and its impact. You will not see the impact of an accident or injury immediately because the calculations are based on a three-year rolling average, with the most recently completed policy year not included in the calculation. This means each incident affects your insurance premiums for three years before it drops off. During this three-year period, the claim amount may be updated to reflect the current amount spent on insurance. This means that prices based on that long-ago accident can increase during the three years the incident is part of your experience mod calculations.
How Can I Improve My Experience Modification Rating?
Since any work-related accident or injury affects your experience mod, it pays to do as much as you can to prevent accidents and improve safety. Beyond that, it is also important to manage any injuries in the most efficient way possible. Examples are.
Prevent Accidents and Improve Safety
- Set up an effective claims management program:
First, examine your claims and categorize them based on their type (e.g., slips, trips, and falls; strains and sprains; auto accidents) and cause (e.g., physical, human, organizational). Then, focus your efforts on addressing the root cause of these claims (e.g., lack of training, missing signage, leaked water on the floor).
- Investigate accidents and near-misses:
Help identify why accidents and injuries happen, by looking at past incidents. Be sure to report all near-misses and claims, even zero-dollar ones, because they can help you identify trends and potential hazards.
- Call on Loss Control Safety Experts:
Loss control experts can help improve jobsite safety through slip, trip and fall assessments, ergonomic surveys, fleet safety and other types of programs and training and much more. For additional safety resources and materials, your worker compensation carrier to see what they offer.
- Implement a comprehensive Safety Program:
Your Safety Program should include training, focusing on the problem areas you identified previously. You will need to periodically update the program as you resolve safety issues and encounter new ones by performing at least an annual review.
- Improve your overall safety culture:
Management should lead by example and encourage your employees to look out for one other. When everyone is checking for potential hazards, you can identify and solve problems before they cause an injury.
- Develop a Return To Work program (RTW):
Your Return To Work program should be designed to bring workers back to the job while they are recovering. Not only does this boost employee morale, but it can improve your experience mod because workers who are back on the job earn at least part of their normal paycheck, reducing the amount of indemnity payments. The experience mod calculation only includes 30% of the actual primary and excess portions of an individual medical-only claim. As a result, medical-only claims are reduced by 70% whereas indemnity payments go into the calculation directly.
- Offer Wellness Programs:
Keep workers healthy and in good shape because fit employees usually heal more quickly than those with health conditions. This can also be a great employee benefit.
- Use a post-offer, prework screening process:
You can make sure you are hiring employees who can perform the physical demands of the job with a screening process. After creating an accurate and validated job description that includes physical demands, you can collaborate with a physical therapist to design a test to help ensure your new hires are physically qualified for the position they are hired to perform.