What Is the Lowest Experience Modification Rate Possible?

Lowest EMR Possible

When it’s time to calculate your Experience Modification Rate, it goes without saying that a low number is always desired. Just how low can that number go, though?

First, you have to plot your EMR

The reasoning behind having an assigned Experience Modification Rate is to give accurate insights for insurers to have a basic understanding on how to calculate your premiums. This mandated number protects the insurer from a poor coverage decision, while protecting you from falsely-inflated premium charges.

Calculating your EMR involves a few complex factors, which we go into greater detail with, here. However, once you have acquired your business’ EMR, you can then calculate the lowest possible EMR for your company.

How to find your lowest possible EMR

Now that you have the proper figures for your Experience Modification Rate, we can begin to delete a few factors in order to find the lowest possible rate for your business.

With any Experience Modification Rate, you’re effectively being “rated” against your industry’s average benchmark for compensation claims, which is always a flat rate of 1.0. For example, if you have an EMR of 0.8, then your business reported 20% less in compensation claims than the average within your industry.

Now that you have your current Experience Modification Rate, however, we will need to temporarily remove all of your claims data. The purpose of this is to remove the multiplicative factor used to create your risk profile based on your company’s previous injury rates.

How to use this number to increase savings

Here’s an overly simplified example: Let’s say you are looking to calculate your lowest potential savings on insurance premiums for your business. Your Experience Modification Rate is currently resting at 1.0, but you aren’t happy with the capital being spent on insurance premiums. So, you want to take a look at the numbers and see just how much money can be saved – which this lowest potential number shows you.

At an EMR of 1.0, let’s say you’re spending approximately $50,000 on claims. Well, after temporarily removing all of your claims data, your calculation should show the lowest possible EMR attainable for your business – which we will pretend is 0.50. That means that – by implementing the correct safety management and education systems – you can potentially save $25,000 by having 0 claims within the next 3 years.

You may think that maintaining 0 claims for the next 3 years is an impossible task, though – but don’t be so quick to jump to this conclusion. Click here to view our content regarding safety improvement measures within your workplace.

Who knows, you could save an executive salary by doing so.