The Two Faces Of Experience Rating Workers Compensation Policies

Happy faces and sad faces. Good faces and evil faces. And don’t forget about the traditional faces or masks of drama, comedy and tragedy. Conjures up a mental image doesn’t it? Well workers compensation experience rating, just like greek drama, has two distinct faces that I think we’ll call The Good and The Bad.

The Basics. Experience rating is a method used in workers compensation to incorporate an individual employers loss history or claim experience into the pricing mechanism of their policy. The experience rate developed for an employer is expressed as a factor with 1.0 being the norm. In other words an employer who has a 1.0 EMR is considered to be no better or no worse in regards loss experience than others who perform the same type of business operations as the employer in question. Experience rating development is fairly complicated. While the concept is somewhat easy to grasp, the details are a bit more elusive. An individual employers EMR or experience rate is developed by the rating bureau for the state in which the employer conducts their business. Different states use different rating bureaus. Some states have their own. Probably the most significant thing to remember is that an experience modification rate is specific to each individual qualifying employer.  Construction companies and contractors are especially effected by the EMR. Visit our main website for much more detailed information on the EMR or the experience modification rating process.

The Good. Employers who show historical control over their workers compensation claims will be awarded a credit EMR. That’s anything below a 1.0. Credit EMR’s typically range from .75 to .99. This factor is then applied to the employers workers compensation premium. So because of the employers efforts and positive loss control results they may be paying a lower premium than their competitors. This is good and may, depending on the type of business, make a significant enough difference in the employers bottom line that they may be able to secure more work for their company.

The Bad. Employers who have experienced a poor historical loss history will be penalized by having a debit EMR factor applied. A debit EMR is anything above a 1.0. In our consulting work we’ve seen these factors above 2.0! Can you imagine having to pay your workers compensation premium knowing that you are paying 2 times or more of what you could be paying! Talk about bad! A run away EMR can devastate a business. Loss of government contracts, inability to secure bid work and a huge negative effect on an employers bottom line are just a few of the things that can happen with a bad EMR.

I’ve written about this topic many times in this blog. Just search around and you’ll find many more posts about this topic. There’s a reason for that. While claims do happen, it’s a proven fact that those employers who have a handle on safety within their workplace have a significant head start over those who do not. So, put on your happy face, learn about the EMR and how it works. Visit our website for more information on what you can do when faced with experience rating problems and learn how to regain control over your workers compensation program!

Hope this helps out and thanks for reading!