When the goal is to have a single, independently developed indicator be used as a construction safety guide, the EMR can quickly fail the test! As the result of payroll, workers compensation claims and classification code factors the EMR is really not to be used for anything other than its original design, that of a premium modification factor. Maybe the confusion is over the name…Experience Modification Rating Factor or EMR. It does mention experience after all but let’s go a little deeper…
Insurance carriers use the EMR as a guide, so why shouldn’t the construction industry? It’s true. One of the first things an underwriter will look at when reviewing a new client submission for workers compensation coverage is the EMR. And it’s true that there is generally a maximum EMR that their underwriting department has set for new client acceptability. In todays workers comp market place, those carriers providing coverage will more than likely have some sort of tiered pricing system. Think of it as different pricing levels; A preferred level, where the rates are extremely competitive and a standard level where the rates are not as competitive. You may even find a super preferred level. An insurance company will have different EMR maximums set for each pricing tier. For example in the standard level a company may accept an EMR up to 1.30, in preferred maybe 1.10 and in their super preferred nothing over 1.0. But you see, even an insurance company recognizes the restrictive nature of the EMR calculations.
Here’s some tools a workers comp underwriter will typically use to evaluate an account:
- The EMR; A starting point.
- Currently Valued Loss History: It’s important to see the details on all claims, not only the ones that show up on the EMR, but also claims from the most recent year past…ones that won’t show up on the EMR until next year!
- OSHA Safety Violations: Just because an employer has a low EMR doesn’t necessarily mean they operate a safe work environment. Go to the source for safety violations. That’s OSHA!
- A New Clients Website along with all available Social Media: Would you really be surprised at what a website says about the author? Or what their social media pages say? Bet you didn’t know that underwriters will quickly check this information out. It’s easy for them to do. They’re looking for published business operations or type of work the prospective client says they’ll perform. How about an application from an excavation company that says they typically grade farm ponds but on their website says they’ll do blasting for road construction?
You’ll find that when reviewing a new account a workers compensation underwriter will use the EMR together with currently valued loss runs, their individual experience with the employers type of operations along with several other tools to get a much better picture as to the true safety issues presented by the employer. They recognize that underwriting an account is about looking at the past, gaining a good understanding of the current risk and projecting the potential to make profit for their company. When an insurance company accepts a new client, you can bet they’ve done their homework, can tell you why the EMR is elevated and can justify accepting the business on all the facts, not just a single premium modification number.
The lesson learned from a workers compensation underwriter should be that the EMR tells only a partial story about the account and for the full picture you have to dig deeper.
Loss trending becomes more important than this single modification factor. To get a complete picture of how safe an employer operates it would be better to take a look at the historical loss trending of the account. Compare that empirical data with steps an employer may have taken to better their work place safety and answer these questions:
- Does the employer have an active safety program in place?
- Has the employer seen an improvement in lost time accidents?
- Does loss trending show in a positive direction for the employer?
- Is their safety training and program working?
- Does the employer have control over safety at their work place?
The EMR should never be looked at as a stand alone number. Depending on an employers size, it’s true that a single claim may push the experience mod up and over 1.0. Too many individual factors go into its development and when taken out of context and used by itself, without related detail, it really doesn’t mean much.
When there’s a question about the safety of an employer contact an independent workers comp consultant for help. They have the tools and experience to review the facts and will shed light on the correct use of an EMR.
Hope this helps out! Thanks!