Last week we started talking about Experience Modification Rate (EMR), and how your company’s payroll, inherent risk, and history of injury claims affects your individual rating. Today we will take a look at what having a high EMR will wind up costing you, and what you can do to lower your EMR.
Just to recap, an EMR score of 1.0 is considered the industry average, and is the basis to consider a company’s score as being high or low. These numbers are extremely sensitive, so even if your business’ EMR is 1.01, that’s’ higher,’ and 0.99 is ‘lower.’
If your company’s EMR is 1.2, that means that you may be liable to pay as much as 20 PERCENT higher than the industry average (a company with a 1.0 EMR). In order for you to offset the cost of your increased liability insurance premiums, you will need to raise the prices you charge your clients when you put in bids for jobs. If your competition has an EMR less than yours, they are able to provide potential clients with more competitive rates for work, because they do not have the additional overhead that you do in paying liability premiums. With this in mind, having a high EMR directly leads to a loss of business for your company, because companies that pay less for their insurance have a larger margin for negotiating job pricing.
Don’t throw in the towel just yet if you currently have an EMR that’s higher than average. It IS possible to lower your EMR by developing and enforcing effective safety programs to eliminate hazardous situations and prevent injuries from the beginning. It’s unrealistic to expect that your employees won’t encounter injury—the fact of the matter is that this industry is inherently risky. However, being mindful of managing injuries and workers’ compensation claims as they arise is an integral part of controlling and ultimately lowering your company’s EMR. Between strictly implementing standards for workplace safety, and handling any issues immediately as they arise, you dramatically improve your chances of maintaining an EMR that won’t hurt your company.