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EMR, XMOD, EMOD or Experience Modification Rate of 1.20 or higher...That's a Problem! This page is about how to fix it..

Out of control or high EMR's, XMOD, EMOD or Experience Modification Rates (they all mean the same thing) can be devastating for a business! We all know that workers compensation insurance is expensive. But when an employer faces an out of control EMR it can effect their very ability to bid on government contracts, secure work, maintain existing work and even keep the doors open and stay in business.

Contrary to popular belief among insurance professionals and employers alike large swings in the EMR are possible. Our firm has worked many cases where an employer has gone from .93 in one year to over 1.80 in the next! That's over a 190% increase in premium! In the past it was understood that shock losses or large single claims would have a small effect on the EMR. However in today's world, through the erosion of weighting factors, ballast and increases in split points it's not uncommon to find significant increases from one policy year to another.

How We Can Help:

Client Feedback...

Commercial Mechanical Contractor...
"Our business bids on government contracts and it's imperative that we maintain a 1.0 or better EMR..."
...read more

Building Contractor...
"Our company works on large commercial building projects our EMR came in at 1.40 causing us a problem securing work..."
...read more

Manufacturer Distributor...
"A national distribution company our EMR went from .91 to 1.65 in one year! Our agent contacted WCC for help..."
...read more

Experience Modification or EMR Review:

Drop us an Email or just give us a call at 573-489-8323 to discuss your EMR problem. We don't charge to talk with you about your problem! During our initial interview we'll want to determine as quickly as possible how we may be of assistance to you. We will always ask that you provide us with certain documentation regarding your Experience Modification Rate. We need to take a look at your most recently valued loss history and if you work with an agent we will want to work with them to gain a better understanding of your specific EMR situation. We'll provide you with our qualifications and talk about the cost for our help. Once you decide to have us help, we'll set up your account and begin our EMR Review.

Experience Modification Reviews:
  • Independent research and verification of your experience mod factor;
  • A written report detailing our findings including our opinion of the accuracy of your current EMOD;
  • Verification of rating factors used in the calculation of your experience modification factor;
  • Verification of loss claim data used;
  • Verification of timely reporting of data to the rating authority by the insurance company;
  • Detailed Claim Review - When required.

We will review details of current factor items and may include:
  • Review of D Ratio and ELR or Expected Loss Ratio;
  • Actual Incurred and Primary Losses;
  • Expected Losses and Primary Losses;
  • ERP, Experience Rating Period;

We will work with you to correct errors discovered in your EMR and to develop a plan of action for gaining control of your EMR!

Contact our office if you have a problem with a high EMR. If your EMR, EMOD, XMOD or Experience Modification Rate is over 1.20 you've got a problem! Through our EMR Review service we will help identify specific problems with EMR calculations, claims and other rating factors that may be adversely affecting your rate. We then work with you to develop the best possible approach at finding a solution to your high mod. As a matter of fact, if your EMR is over 1.0 you should have an independent EMR Review conducted to verify that all rating elements used in the calculation are correct.

The Basics:

Experience rating should be considered the "fine tuning" or refinement of the cost of a workers compensation policy for any individual employer. That's right. Experience rating is employer specific. It allows individual employers to have some control over the final premium they pay. Control is gained as an incentive for employers to provide safe work places. In fact, it's about claims. Employers who have few or no claims are rewarded with low EMR's and employers who have claims are penalized with higher EMR's. Check out this other page on our website to learn more about Experience Modification Rates.

Experience rating consists of both debits and credits. The norm is identified as 1.0. A debit factor is any EMR greater than 1.0 and a credit factor is any EMR less than 1.0. For example a 1.30 EMR is a debit factor and a .90 EMR is a credit factor.

Manual rating is the starting point. Manual rating is where the loss experience of a group of similar work process are lumped together to statistically develop a rate for premium generation. For example all office workers may be identified as "clerical." So all claims generated from the "clerical" group will be combined together and averaged out to develop a rate that needs to be charged to support the average claims from the "clerical" group. In this case the "clerical group" is represented by a specific classification code and the rates developed reflect the normal experience for all employers in that code. Same thing applies for all other work processes.

Experience rating fine tunes manual rating to an individual employers specific loss experience by taking into consideration their individual loss characteristics. This is represented in the ERM calculation formula by both frequency of claims and severity of claims. Historically, a pattern of claim frequency is weighted heavier than a single large loss. The idea here is that an employer with a larger number or frequency of claims will ultimately generate higher workers compensation costs.

Factors That Effect The ERM Calculation:
  • Qualification: Who Qualifies for Experience Rating? Not all employers are experience rated. An employer must meet certain eligibility requirements which are determined by each individual state and will include a minimum premium threshold.

  • Accident Limitation: It has been determined that very large losses have a negative effect on the accuracy of the ERM calculation. Large individual claims are capped by individual state accident limitations. These are noted as limited losses on the ERM worksheet and any excess claim dollars over and above the state limitation are excluded from the calculation.

  • Split Point: This is the dollar level where primary losses are separated from excess losses. Primary losses are given a much greater weight in the calculation of the ERM. The split point for NCCI states is being increased from a historical level of $5,000 to $15,000. The rate of this increase is controlled by each individual state. So be aware that this increase in the split point will have an impact on the calculation of all Experience Modification Rates.

  • Experience Rating Adjustment or ERA: It's been determined that medical only claims have a much less impact on workers compensation costs. These are typically claims that require medical or attention only, think first aid. Most states have adopted a 30% limitation on these types of claims. In other words only 30% of the primary and excess medical only loss will be included in the ERM calculation.

  • Payroll: Audited payroll by classification code as developed and reported to the rating bureau by the insurance carrier is used to develop the expected losses and expected primary losses for an individual employer. This is accomplished by multiplying the payroll by the expected loss rate and d-ratio for each classification.

  • Claims: Claims or losses that have incurred on policies during the experience period. All claims that occur during the experience period will be shown on the EMR worksheet. Claims may be adjusted by state limitations or reduced because of medical only limitations. Claims include paid losses and loss reserves as established by the insurance carrier. Adjustments can be made to claims and adjustments will be reflected in the EMR.

  • Experience Period: You can think of this as a sliding scale with older years falling off and newer years comming into the calculation. The experience period is the time period looking back where payroll and claims data are derived. It can be confusing trying to determine the correct experience period but in simple terms it will be four years back from the experience rating date, excluding the most recent year. So the experience period for a policy with an anniversary rating date of 10-01-2013 will be 10-01-2011 to 2012, 10-01-2010 to 2011, 10-01-2009 to 2010. All claims from these policy periods will impact the ERM.

Serious Problems Associated with High EMR's:

Insurability: A high ERM can prevent an employer from securing competitive insurance coverage. Most insurance carriers have a maximum ERM that they will apply when underwriting an employers operations for coverage. This will typically apply to both new clients and to renewal business. When an employer cannot secure coverage through the standard markets they will have to turn to the assigned risk or residual markets. These programs are the "markets of last resort." Accordingly, you'll find that assigned risk rates are significantly higher than those available through standard market carriers.

Affordability: High premiums go hand in hand with out of control or high ERM's! If an employer is able to retain coverage through a standard market carrier, they will still see their premium multiplied by their ERM. Think about it. An employer whosestandard premium is $100,000 who has a good ERM of .90 will pay a premium of $90,000 while an employer with a 1.60 ERM will pay a premium of $160,000! That's a big spread for two employers who may be competitors in the same type of business. Another consideration with this point is that if an employer finds they must secure coverage through assigned risk, in many states, they will be charged an additional premium factor known as the AARAP factor. In some cases this will add another 25% onto the premium!

Business Considerations: We've already mentioned the loss of or the inability of an employer with a high EMR to secure certain contracts or bids for work. While we don't necessarily agree, there are many organizations out there who look to the EMR as an independent safety indicator. In other words a number that means the employer involved has little, if any, control over their work force. Fair or not that's how some look at the EMR.


Your not alone! If you have a problem with your EMR do something about it! Let us help. The process we follow will verify the rating factors used to develop your EMR. Don't be fooled, the development of experience rates are complicated and errors are made.

This premium modifier carries more weight than just something applied to workers compensation premium. You'll find that this factor is now used by government entities as one qualifier of bidding projects. Employers with EMR's over 1.0 are many times excluded from bidding on government contracts. It's also used by others as an indicator of how well a business maintains safety and you'll find it being used as a decision making tool for approving contractors to perform work. Many employers are losing work are unable to gain more work because of a high EMR.

Our Experience Modification Review is an independent review of all factors that go into the development of the EMR. Employers who have experienced a frequency of claims or large workers compensation losses are subject to penalties that go along with a high mod factor. Certainly large increases in premium are a big concern along with securing or keeping work, but in some cases it may even impact the ability of a business to survive!

Contact our office today! We may be able to help..

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