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Workers’ Compensation 101: Understanding Your Experience Mod Rate

Sep 6, 2017 6:30:00 AM

The Experience Mod Rate, or EMR, is an important component of your company’s workers’ compensation program. Do you understand what it is and how it impacts your premiums?

Work Comp 101 Understanding EMR  - FB.jpgWhat Is The EMR?

The basic tenant of the EMR is that it uses an employer’s past experience – your losses – to project future losses. It is a calculation using actuarial rates to compare a company’s experience to state averages for similar companies. Once calculated, the rate is utilized to modify a company’s workers’ compensation premium.

How Does The EMR Impact Your Company’s Workers’ Compensation Premium?

Your company has a starting premium. This is based upon your payrolls in your classification codes and the associated insurance rates with those classification codes. That total is called a company’s manual or pure premium. Then, your EMR is applied to the premium.

  • If you have an average EMR of 1.0, no modification is made to the premium.
  • If your EMR is over a 1.0 – let’s say 1.10 – your premium would be assessed a 10% debit.
  • Conversely, if your EMR was under a 1.0 – let’s say .90 – your premium would be assessed a 10% credit.

There are other factors that then go into your premium, but the EMR can have a substantial impact on that cost. If you happen to be a self-insured program or on a high deductible, the EMR is not as important to your premium calculations, but it can still be used a metric of how well you are managing your claim costs.

Experience Rating Period

The EMR is comprised of 3 years of rolling data, not including the expiring policy period. That data is reported by the insurance companies involved with your program six months after the effective date.

To further understand the EMR, watch the Workers’ Compensation 101 Webinar where I walk through an example of an experience rating worksheet.

Having a good grasp on what the EMR is, how it works, and how it can impact your premium is a key component of managing your organizations’ workers’ compensation program.

Gibson

Written by Gibson

Gibson is a firm of advisors and consultants that help clients get to the proactive side of insurance. We specialize in working with companies looking to find their edge—where they are growing as an organization, differentiating themselves in the marketplace, and preparing for current and future risk. Together we will find the perfect combination of insurance and consulting.