Increase Profitability by Improving Safety
What is EMR?
EMR = PROFIT! The Experience Modification Rate is the number that insurance carriers use to calculate your company’s risk. The higher your risk the higher your EMR, and correspondingly – the more you pay for your Workers’ Compensation (WC) Insurance.
In high risk industries like construction, manufacturing, or warehousing/distribution, WC insurance is typically on of the top three highest costs on the Profit & Loss statement. So having a high EMR can severely impact your company’s profitability and competitiveness.
The EMR is based on your company’s loss history for the previous three years, but not including the immediate past year, as compared to industry average. The baseline EMR is 1.0. The formula used to determine your EMR is complex. However, the most important thing to know is that your EMR greatly affects your operating costs.
Compared to industry peers, if your company has fewer claims in both number and severity, your EMR will be lower. If you have more claims in same categories, your EMR will be higher, as will be your WC insurance premiums.
Who Determines EMR?
The governing body for calculating the Experience Modification Rate is the National Council on Compensation Insurance (NCCI). The NCCI uses two major components to calculate your EMR: 1) loss severity, which measures loss amount and 2) loss frequency, which measures how often claims take place.
Having fewer and less expensive claims is the key to reducing both your EMR and WC insurance premiums.
Can I Lower My EMR?
In the real world workplace incidents are inevitable. However, they are often preventable. Incidents increase your EMR, leading to higher WC insurance premiums and overall costs.
The good news is that you CAN completely control and lower your company’s EMR by:
- Implementing an effective safety program;
- Creating a 12-month training calendar;
- Eliminating hazards through regular audits;
- Managing claims proactively; and
- Compiling monthly reports on all activities.
A company with an EMR of 0.8 will pay 33% less in Workers’ Compensation premiums than a company with an EMR of 1.2. Now that’s a competitive edge!
But you don’t have to accept a high EMR! There are ways to reduce both your EMR and WC Insurance premiums. The best way is through a comprehensive and effective safety program that protects your People, Property, and Profits!
Companies can leverage an effective safety program to lower their EMR, reduce costs – AND gain competitive advantage!
In today’s competitive marketplace, companies with a low EMR quickly establish a competitive advantage when looking for new or maintaining existing business. The EMR has a direct effect on your company’s overall operating costs, and profitability by determining how much you pay for Workers’ Compensation Insurance.
However, your company doesn’t need to be handicapped by a high EMR. You can decrease your EMR by creating an effective safety program, generating a strategic training calendar for your employees, auditing regularly, managing claims proactively, and compiling all necessary safety reports.
By improving your company’s safety practices and programs you will both improve safety and lower EMR. Additional benefits can include increasing competitiveness and profitability.