The Experience Modification Rating (let’s call it the Mod. for short, sometimes referred to as the EMR) can have a significant impact on your Workers’ Compensation Premium. Your Mod. indicates whether your losses are better or worse than expected. If better than expected, you receive a credit, if worse, a debit is applied.
How it works (this will be a very rudimentary explanation without detailing all of the math):
- The type of work performed by all employees (Defined by a Class Code in the first column of the Mod. Sheet)
- The Expected Loss Ratio (ELR) per duty performed. (The ELR is listed in the 2nd Column of the Mod. Sheet)
Using the example of a Heating and Cooling Contractor (HVAC) with Technicians (Techs) in the field and Clerical Employees in the office:
- The Techs have an ELR of 2.62 – this means that for every $100 of premium collected the State of MO (in 2014) anticipates total claim payments of $2.62
- For the Clerical Employees the ELR is just .12 (which reflects their much lower exposure to work related injury).
Determining Estimated annual Losses (e.g. Claim Payments):
Our Employer pays Techs $100,000 annually and Clerical Employees the same. Now lets see what MO will anticipate in Claims payments:
- Tech Payroll $100,000/100 x 2.62 (ELR) = $2,620
- Clerical Payroll $100,000/100 x .12 (ELR) = $ 120
Determining the Mod (in very simple terms)
Actual Losses for the policy term (actually 3 years of data is utilized) is now divided by Expected Losses. If Actual Losses are significantly less then Expected our Employer will receive a nice credit.
For Information regarding how to help control your mod. call 636-519-0059 or email: firstname.lastname@example.org - I will be happy to assist.
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