Did you know that most states require you to have a workers' compensation insurance policy? It's extremely important to have since work accidents can happen at any time. Are you wondering what your EMR rating is and why it's so important?
In this article, you'll learn what an EMR rating is, why it's important, and how to lower it. Read on to discover how to know what your EMR rating is and how to lower it for lower premiums.
What Is an EMR?
An EMR stands for an experience modification rating which is also called a MOD rating or factor. In California, it's called an XMod. It's used to price workers' compensation insurance premiums. Third parties look at your history for an idea of future risk.
In construction, for example, insurance companies will use an organization's EMR to determine the past cost of injuries and what the future risks will be. The average EMR is 1.0. If your EMR goes below 1.0, then your company is considered safer than most. This then means lower premiums.
If your EMR goes above 1.0, you're considered riskier, and that might cause your company to be unable to bid on certain projects.
A higher EMR means a higher insurance premium as well. If your EMR is above 1.0 it's considered a debit factor. If it's less it's known as a credit factor. A good example is if an employer has had no claims and their credit factor is 0.85. Their unmodified premium is $100,000.
So their modified premium would then be $100,000 X .085= $85,000. Say their credit factor is 1.25, then it would be $125,000, which would mean their modified premium is higher.
Determining Your EMR
Your EMR is calculated by your actual insurance and workers' insurance compensation claims. These have been reported to the NCCI (National Council on Compensation Insurance) over 5 years, but they only use the past 3 years.
Each claim is analyzed using an EMR worksheet that looks at different factors such as the type of incident and monetary value. Another factor that could affect your EMR is the size of your payroll.
You can compare yourself to the industry average which is 1.0, and keep in mind anything above 1.0 is high. Looking at best performers in your industry, they might have very low EMR's, so a 1.0 could then be considered high.
You can also compare yourself to your own performance. Since no employers have the same experience, take a look at yourself instead of others. Maybe you had a higher EMR in the past, but how are you decreasing it now? Are you using enhanced safety programs and paying more attention to safety measures?
How Do I Lower EMR?
You'll want to work with a trusted workers' compensation insurance company. after this, you'll want to learn about any procedures for best practices your company isn't following. Be open to learning these.
Next, you'll want to eliminate any hazards and prevent injuries. If you have no injuries there are no claims. Injuries can always happen, but you want to have a good response to them to avoid your EMR from increasing.
Have a plan in place to manage injuries and workers' compensation claims. Once you decide on a plan, implement it and make sure your team is on board as well. Make sure to document all the changes you've completed and send your insurance company a summary of it.
Regularly meet with workers and discuss job safety. Have huddles at the job site in the morning and discuss safety practices. Develop a return to work programs for those who are disabled, injured, or sick.
Once they're cleared to return to work from their physicians, make sure you have a return to work program in place. They can include a change to their original job duties until they can return to their original job.
Having these programs helps companies save money by reducing disability claim costs and cutting training time for hiring new employees.
Who the EMR Is Right For
You'll want to pay attention to your EMR since it can easily change your insurance premiums.
You especially want to pay attention if you're:
- A buyer of an existing business that has few or no workers' comp claims
- A business that's been established for at least three years
- A business with lots of claims that want to lower their EMR
- A business with few or no workers' compensation claims
Your EMR can severely increase or decrease your insurance premium. Working to lower your EMR and monitoring it can improve your profitability.
How they determine your EMR:
Your business age. If you're a new business with less than 3 years of claims, your EMR will normally be 1.0.
Frequency of claims. No matter how extensive they are, too many claims will affect your EMR.
Total premium. An EMR could be applied based on the total premiums you pay.
Your industry. Some industries have more claims due to the nature of the company than others. If you work with chemicals or dangerous tools, you're not penalized as hard for a few small claims than low-risk industries.
Determining your EMR, and then acting on lowering it is vital to keep insurance premiums down. Keep your industry in mind, and plan out all safety measures you can take to lower your EMR rating.
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