We all know that your company’s Experience Modification Rate has a direct impact on your insurance premiums, but there are also several indirect ways that a high EMR can affect your bottom line. First, it’s important to understand exactly where this crucial number comes from.
How Your Experience Modification Rate is Calculated
Experience Mod calculations are complicated. Boiled down to the basics, it’s based on workers’ comp claims going back four years. Your actual losses from claims are taken into account, along with expected losses. The type of incident is also considered, along with the amount paid out for each accident.
An EMR of 1.0 is the national average and acts as the baseline. Above a 1, and your workers’ comp insurance premium goes up because you’re deemed riskier than average. Below the average, and you’re rewarded with a lower premium for an above-average safety record.
Essentially, fewer accidents equal a lower insurance premium—but the impact of your EMR doesn’t end there. EMR disclosure is a common part of the bidding process. Increasingly, however, companies won’t even accept bids by contractors with an EMR below a certain threshold, often 1.0.
In other words, an above-average EMR can completely take you out of the running for a job—before you’ve even had a chance to bid.
Your EMR is Your Reputation
Equally important when it comes to winning jobs and building long-term relationships with clients? Your reputation. Savvy, risk-averse companies want to work with safety-conscious contractors. The stakes are simply too high to do otherwise, from the exorbitant costs of downtime caused by injury to exceeded budgets and overshot deadlines.
Finally, a high EMR sends a strong message to the top-tier talent that companies must compete over. Not only does a weak safety record indicate an unsafe working environment, it speaks to a company’s leadership. On the contrary, a low EMR signifies a company that values and respects its employees, which appeals to skilled contractors and potential clients alike.
Companies with low EMRs simply work smarter, safer and more efficiently.
While a low EMR may seem elusive, there’s plenty companies can do to achieve a stellar safety record. It all starts with instilling safety into the company culture. A dedicated safety department goes a long way to staying on top of the latest safety requirements, and communicating this crucial information across the company.
Leadership must make safety a top priority and promote it on a daily basis. Starting each day with a safety meeting ensures that every worker has safety at the top of mind before stepping foot on the job. Accountability is also important, along with recognition for an exceptional job that has been completed safely.
Essentially, a high EMR indicates high risk—a red flag in the industry. The hidden costs of a poor safety record can be crippling, right down to lost clients and failure to secure top talent. On the other hand, a lower-than- average EMR is the sign of an industry leader. Beyond lowering insurance costs, it’s simply good business.