What Is an Insurance EMR Rating?

by Fraser Sherman - Updated November 02, 2018

Experience modification rate, or EMR, measures the chance a company will file a workers' compensation insurance claim. Workers' compensation pays out if your employees are injured on the job. If your staff file more claims than average, that raises your EMR rating, which raises your premiums. Making job safety a priority can bring premiums back down.

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  • EMR stands for experience modification rate. It measures the risk of your company's workers' compensation insurer having to pay a claim. If your company has a higher than average accident rate, that will raise your EMR and your workers' compensation premiums.

How EMR Calculation Works

Insurers set your company's workers' compensation premiums using a formula. The formula takes into account the size of your staff: If you have 15 workers, you'll pay less than if you have 500. It also considers your industry. Foundry workers and roofers, for example, have riskier jobs than Linux coders. Their insurance premiums are a lot higher. too.

Next, the insurer looks over your claims history. If your company files the average number of claims for your industry, your EMR rating is 1.0. If you made more workers' compensation claims than average, you get an EMR above 1.0. A ranking below 1.0 shows your workplace is exceptionally safe. To get the figures, the insurer looks at your safety history for three of the past four years.

Why EMR Matters

Suppose your business has a safety problem, and staff has lots of on-the-job injuries, leading to lots of claims, so your EMR ends up being 1.4. That means your premiums will be 1.4 times as high as if you had a clean record. If you run a tight ship, and your EMR is .9, you'll only pay 90 percent of the standard premium.

The added cost of a high experience modification rate can cost you. Suppose you and an identical competitor have base workers' comp premiums of $100,000 a year. You have a 1.3 EMR, so your premiums are actually $130,000; the competition has a .85 rate, so they pay $85,000. Your rival has $45,000 a year more to spend on marketing, research and salaries.

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How to Lower EMR

Once your EMR goes up, you'll be stuck with the higher premiums for three years. Over time, running a safe workplace will bring the premiums back down. The fewer the injuries and the lower their severity, the lower your premiums become. Many accidents are preventable, and working with a safety consultant can eliminate a lot of workplace risk. Your compensation insurer may be able to recommend a good consultant.

About the Author

Fraser Sherman has written about every aspect of business: how to start one, how to keep one in the black, the best business structure, the details of financial statements. He's also run a couple of small businesses of his own. He lives in Durham NC with his awesome wife and two wonderful dogs. His website is frasersherman.com

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