What is an Experience Modification Rate (EMR) and Why Does It Matter?

The experience modification rate (EMR) is a key factor in determining the cost of workers’ compensation insurance premiums for businesses. A higher EMR indicates that the company has had more claims, or more expensive claims, than the industry average. This makes it risky for insurers to cover them. 

By understanding what factors go into their EMR, businesses can work to lower their rate and save money on their workers’ compensation insurance premiums. In addition, businesses can seek out safety training and consulting services to improve their workplace safety culture for the betterment of their entire team.

What is an Experience Modification Rate (EMR)? 

The Experience Modification Rate (EMR) is an evaluation system used by insurance companies to measure the risk associated with providing coverage to a business. The purpose of this rating system is to ensure that businesses are charged appropriate rates for their workers’ compensation coverage based on their history of accidents and losses. 

The EMR takes into account both the frequency and severity of past claims made against a business, as well as other factors such as payroll size and industry type. This information helps insurers determine how much they should charge for coverage to protect themselves from potential losses due to future claims. 

What are The Benefits of an Experience Modification Rate? 

By accurately assessing their risk profile, businesses can better understand what they need to do to reduce costs associated with workers’ compensation insurance premiums. With a lower EMR, companies will get better rates on their policies since they pose less risk for insurers than those with higher ratings. 

Having access to this information can help employers identify areas to improve safety, reduce accident rates, and improve their rating over time. Once areas for improvement are identified, employers can seek out services like safety consulting to improve their workplace culture. Safety consulting services allow businesses to work with experts who can develop safety programs tailored to their industry, and then implement procedures like emergency action plans or respiratory protection plans. As a result, employers can ensure compliance with OSHA and client requirements, keep workers safe, and lower their EMR rate.

What Factors Go into Your Experience Modification Rate? 

So what goes into an EMR rate? Insurance companies use several different criteria when calculating this number for a business:

  • Claims History – Insurance companies look at past claim activity when assessing a business’s risk level. This includes the total number of claims filed against the company and any individual claim costs or settlement amounts paid out by insurers over time.
  • Payroll Size – Insurers also consider how many employees work at a company when evaluating its risk level. Larger payrolls generally indicate a greater potential risk for insurers.
  • Industry Type – Some industries have inherently higher risks than others due to the activities performed or products manufactured. Insurers will consider this when evaluating a particular business’s experience modification rate.
  • State Regulations – Some states have their own regulations governing workplace safety requirements. These regulations can impact how much risk an employer poses from one state compared to another.
  • Loss Prevention Programs & Safety Training – Employers who demonstrate proactive efforts towards reducing workplace injuries through loss prevention programs or employee safety training may qualify for premium discounts.

How Your Experience Modification Rate (EMR) is Calculated 

While there are some variations in particular states, the calculation of the EMR is performed by the National Council on Compensation Insurance (NCCI). The calculation process used by the NCCI involves taking many data points into consideration. 

Relevant data points include claims history, payroll size, job classifications, and industry type. They can then assign each employer an experience modification rate based on a three-year lagging history. An employer with an average loss history among their industry peers will have an EMR = 1.0. Generally speaking, employers with fewer incidents resulting in lost time or medical treatment will receive lower rates, while those with multiple serious accidents may see higher numbers. That is why it’s important to establish rigorous safety training and procedures to ensure the wellbeing and protection of all workers.

How To Improve Your Experience Modification Rate

Fortunately, there are steps employers can take to minimize costly claims against them and improve their experience modification rate over time:

  •  Develop Loss Prevention Programs & Safety Protocols – Establishing clear guidelines around workplace safety incidents and procedures – such as using proper protective equipment or adhering to strict lockout and tagout protocols – helps reduce accident rates significantly over time.
  • Offer Employee Safety Training – Companies should ensure all employees understand what safety protocols must be followed and why they are important. This helps establish buy-in from staff so that everyone understands why following these rules matters. To ensure thorough training, companies can look to safety consulting services for guidance. 
  • Conduct Regular Risk Assessments – Businesses should regularly assess potential hazards throughout all areas where employees work. That way, any issues can be identified before they become major problems.
  • Invest In Injury Prevention Technology – Employers should consider investing in technology such as wearables or automated monitoring systems designed specifically for injury prevention. Devices for fall detection or fatigue management help create safer working environments, which translates directly into improved experience modification rates over time.

Lowering your company’s EMR is good for your bottom line as well as your employees. Keep track of the factors that may be raising your insurance premiums so that you can improve these areas. Making your workplace safer has countless benefits – a great EMR score is just one of them.

At Amerisafe, we pride ourselves in helping our clients maintain workplace safety. Our services include safety consulting, occupational health medical services, and rescue services. Our experienced consultants and healthcare professionals are here to help you ensure a healthy workplace so your team can be productive and safe.

If you are looking to enhance your workplace safety for your team with help from the experts, reach out to us today.

Frequently Asked Questions

An experience modification rate (EMR) is a numerical value used by insurance companies to measure the past cost of workers’ compensation coverage for a specific employer. It is used to determine the premium that an employer will pay for coverage.
An EMR is determined by comparing the actual losses experienced by an employer over a three-year period with the expected losses for employers of similar size and type within their state or region. The calculation considers both the number and severity of claims.