Experience Modification Rate (EMR): What It Is and Why It Matters
Compliance Consultants, Inc. works with countless clients struggling to win larger contracts because of a high Experience Modification Rate (EMR). Many of these same clients also pay exceptionally high workers’ compensation rates.
One thing CCI does, as a workplace safety consulting firm, is to help them master the Experience Modification Rate concept, so they can bring their EMR numbers down. Many clients who manage to improve their rate can benefit from higher-value contracts and cheaper insurance rates.
What Exactly is an Experience Modification Rate?
An Experience Modification Rate (EMR) is a factor used by insurance companies to adjust workers’ compensation premiums based on a company’s past safety record. Experience Modification Rate is basically a numerical measurement of workplace safety.
It represents a company’s historical performance in terms of workplace injuries and workers’ compensation claims. EMR ultimately acts as a benchmark that allows comparing one company’s history against other companies in the same industry.
What is the Purpose of an Experience Modification Rate?
In the insurance industry, EMR is primarily utilized to help determine an organization’s insurance premiums. Insurers use it as a multiplier.
Government agencies, insurance companies, and clients all have an interest in EMR to the extent that it protects them against liability.
Here’s is how companies are scored:
- a score of 1.0 indicates an average safety record
- a score below 1.0 indicates a better-than-average safety record
- a score above 1.0 indicates a worse-than-average safety score
The lower the score, the less a company pays for workers’ comp. But how is the score calculated? Without getting into the actual formula, it is based on a company’s record of workplace injury claims – both the total number and the severity of each one – within the previous three years, compared to the expected claims of other companies in the same industry.
Why an Experience Modification Rate Matters
The significance of a company’s EMR is self-evident when you look at insurance costs. Bringing the number down also brings premiums down.
But EMR matters for other reasons too:
- Winning Contracts – Clients in certain high-risk industries, like construction, insist that their contractors maintain a sub-1.0 EMR. They are reluctant to award contracts to those with higher scores.
- Safety Reputation – A company’s EMR acts as an external indicator of its commitment to workplace safety. It influences how clients, insurance providers, and even partners perceive the company as a business entity.
In terms of both, a higher EMR raises questions. Questions are rarely good when insurance companies and potential clients are asking them. Therefore, it is incumbent upon companies to keep their EMRs as low as possible. Keeping them under 1.0 is non-negotiable.
Even Small Improvements Can Help
Facing a high EMR can be overwhelming for companies struggling with a combination of high insurance premiums and low-value contracts. As a workplace safety consulting firm, we have helped countless clients overcome high scores. Doing so is not as difficult as it initially sounds.
Often small improvements in the way a company does things can help a great deal. For example, providing ongoing safety training keeps employees informed about known hazards, emergency procedures, and safe practices. Knowledge goes a long way toward reducing accidents.
Everything from a robust safety management system to intentional risk assessments and workplace safety consulting makes a difference. But in order to bring down the EMR score, a company needs to fully understand what it is all about. That company also needs to be willing to take an honest look at what is behind a higher score and make the necessary changes.
Get Started Today with a Free Safety Inspection
Not sure how to proceed? Get started by getting a FREE Safety Inspection and learning where you have gaps in safety compliance and vulnerabilities in your safety program.
Compliance Consultants, Inc. can help your organization address a high EMR with meaningful solutions to bring down your score and keep it down.
