What is an experience modification rate?
Business owners in the state of New York with worker’s compensation premiums over $5,000 per year may see a line item that says Experience Modification on their policy.
An experience modification rate, also known as EMR, is a metric that insurers use to calculate worker’s compensation premiums. This rate will take into account the number of claims your company has had along with the severity of them.
This rate can significantly increase or decrease your Worker’s Compensation premiums compared to your industry average.
Your EMR will start with a benchmark of 1.0. As your claims history improves, you will notice your EMR will go down resulting in discounts off your insurance premiums. The same goes if you claim history is negative and your EMR increases over 1.0, you will be paying more in insurance premiums.
How is your experience modification calculated?
The experience modification or experience mod is calculated using the claim data from the three most recently completed years excluding the current term.
When calculating your 2020 experience mod, they will use the claim data from 2016-2018.
The formula used will penalize the company with a higher frequency of claims versus just the amount that was paid out totally.
A company that has 10 claims resulting in $100,000 in costs will have a higher mod compared to the company that had one $100,000 incident.
How to lower your experience mod
Since the frequency of losses weighs more than severity, investing in safety controls will help keep your experience modification low.
Implementing a return to work program and putting loss prevention procedures in place will help aid in keeping your mod lower, and in return, positively impact your bottom line.
Listen, claims are bound to happen, especially in high-risk industries like construction, manufacturing, or the restaurant business.
Knowing what your modification rate is important, but having some help handle your claims is even more important.
Work with an insurance agent who is going to help you through the claims process to make sure you and the insurance company are doing everything to speed up the claim process and get your employees back to work as fast and efficiently as possible.
If you don’t have a relationship with an agent or want a review of your insurance then click the button below to schedule a review with one of our trusted insurance advisors.