Workers’ compensation insurance is one of the essential support services for businesses. However, it is one of the most complex issues when it comes to the calculation of premiums. One metric that is used in the determination of these premiums is the workers compensation experience modification worksheet. Here is what every company should know about experience modification rate or EMR as it is commonly known.
What is EMR?
The EMR is a number, usually more or less than 1.0 that indicates the ability of a company to prevent injuries at the workplace. It takes into account the number and severity of workplace injuries that have occurred in a specific company compared to other companies in the same industry for a period of, say three years.
This information is used to determine the probability of other injuries in the future and therefore determine the premiums that should be paid for a workers’ compensation insurance policy.
Factors Affecting the EMR
Obviously, the EMR is affected by injury rate of the company in question. A company with a high frequency and high severity of injuries has a higher EMR than one with a lower frequency and lower severity of workplace injuries. The different roles of employees also have a direct bearing on the company’s EMR.
For example, a machine operator is at a higher risk of getting injured than a telephone operator. The relevant authorities provide the information on the riskiness of various job positions in your state.
Calculating the EMR
Though the overall process of calculating a company’s EMR is complex, the first thing that insurers have to determine is the company’s base insurance premium. This base insurance premium is a function of the riskiness of each job position and the financial compensation attached to it by the workers’ compensation insurance authorities.
Once the base is calculated, the information on past injuries is then considered to predict the possibility of other injuries in the future. The rules of mathematical probability are applied to determine the chances of injuries in the future. For example, a company with many small injuries in the last three years is likely to have a big injury in the future. It will, therefore, have a higher EMR than a company with just one severe injury in three years.
Implications of a Higher EMR
The industry average EMR is normally taken to be 1.0. If your EMR is less than 1.0, you have a reason to smile. However, if your EMR is more than 1.0, you have a reason to worry. This is because you are a bad risk to workers’ compensation insurance companies. You will have to pay more in premiums to compensate your insurance company for the risk taken in insuring you.
To add an insult to the injury, it will take at least three years to reduce this EMR. Broadly speaking, the EMR is a measure of a company’s ability to prevent workplace injuries. Companies that can reduce the probability and severity of workplace injuries are rewarded with low premiums for their workers’ compensation insurance policies.…
