What happens to the EMR, the experience modification factor, when the policy effective date is changed on a workers comp policy? We are asked this question several times a week so in this blog we’ll talk a little bit about the ramifications changing a policy effective date has on the EMR. Rules about application and timing of the EMR effective date apply differently to single policy and multiple policy situations. This information is for single policy applications within NCCI states. For details about multiple policy situations or other rating bureau rules, contact our office for help.
The application of an EMR, or experience mod, for an employer is determined by the rating effective date and the anniversary rating date. The anniversary rating date is typically the effective date of the insurance policy however it does not have to be. It can be changed or modified by the rating bureau. When shifting an effective date of a policy the insured will experience a lag or delay in development and application of a modified EMR. An experience mod rating applies for no less than three months (there are some exceptions) and no more than fifteen months. You should keep in mind that the EMR is effective on the rating date or rating effective date. Anniversary rating date and the rating effective date are not always the effective date of the policy. Confused yet? Ok, let’s do it this way…
…An EMR that is applied on the anniversary rating date will apply for the full term of the workers compensation policy that begins on that date. So, a policy that is effective on 1-1 and has an anniversary rating date of 1-1 will have an EMR effective on 1-1. That EMR applies for the full 12 months of the original policy period. This rule also applies to any policy that begins up to three months after that date. So…a policy that originally began 1-1 that was cancelled and rewritten effective 2-15 will maintain the same EMR for 12 months after the beginning date.
…If a policy begins more than three months after the anniversary rating date, the current EMR will continue to apply to the new policy until the EMR expires. Check the EMR worksheet for that date. At that time, a renewal EMR will apply to the new policy from the expiration of the previous EMR to the renewal date of the policy. A renewal EMR will then apply to the new policy and the anniversary rating date will have shifted to coordinate with twelve months after the effective date of the new policy. At that time a the renewal EMR will again apply annually from the anniversary rating date.
When there is a shift of anniversary rating date, rating effective date and policy effective and expiration date the rating bureau will make a determination, after review of the most recent full term policies and unistat or reported unit statistical data, as to the application of the employers new rating effective date.
There are other considerations. For example a shift in the rating effective date of an EMR will certainly change the EMR experience period. This action will have an effect, positive or negative, on the calculated EMR.
A final word. Changing the effective and expiration date on a workers compensation policy may have an unknown effect on the employers EMR. When considering this type of change to an existing experience rated policy be sure to explore all ramifications before taking the leap! What may look like a good thing may just turn out to be a costly (premium) event.
Hope this helps you out and thanks for reading!