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How is an EMR Rating Determined?
Workers compensation insurance experience rating is a mandatory program designed to measure
and rate the risk of individual companies. Experience rating compares an employer's
actual claims experience to the expected or average experience of all similar
business types within a state.
An experience modification is developed and applied to risks with premium large
enough for the insured's past experience to be an indicator of how much benefit, or
claims, costs will be paid on behalf of the insured in the future. If an employer's
past experience is better or worse than average, his premium is adjusted downward or
In general, employer experience rating refers to a record of premiums and losses
under a policy or polices. This provides a basis to predict future rates or costs
for insurance carriers.
An employers' Experience Mod refers the factor calculated from actual loss
experience that is used to adjust an the businesses manual premiums (higher or
lower) based on the businesses loss experience relative to the average underlying
manual premiums. The Modifier (Mod) compares the insured experience to the average
A modification factor is a factor applied to the policy premium for a risk to
reflect variation from the experience of the average risk of a similar type. From
the risk's own past experience, the experience modification rate is determined by
comparing actual losses to expected losses. This comparison of future losses results
in a premium reduction (credit) or a premium increase (debit).
For example, a modification of .85 results in a 15% credit or savings to the risk,
while a modification of 1.10 produces a 10% debit or additional charge to the risk.
In some cases, no change results and a modification of 1.00 (unity) is applied.
In computing insurance premiums, experience modification factor refers to a
provision for premium adjustment that recognized the merits or demerits of
The modifier or "Emod" is a factor calculated from actual case loss experience, as
reported on the unit statistical reports, used to adjust an insured's manual
premiums (up or down). It compares the insured's experience to average class
experience related to the same industries.
A credit experience rating modification lowers the net premium cost of the insured.
A credit experience rating modification shows that the insured has less than average
A debit experience rating modification increases the net premium cost of the
insured. A debit experience rating modification shows that the insured has greater
than average loss experience.
A risk, or employer, is eligible for an experience rating once their payrolls or
other exposures developed over the last year (or last two years) of the policy
period produce a qualifying premium. This threshold varies by state but is typically
around $5,000 annually. If the Mod factor is based on more than two years, a higher
qualifying premium is required. To qualify for interstate (multi-state) experience
rating, a risk must be eligible for intrastate (single state) experience rating.
They must also have premium and exposure in at least one additional state
subscribing to interstate rating.
The ELR is the factor used in the experience rating calculation that estimates
average anticipated loss levels of a classification for the experience rating
period. The ELR factor is calculated for each classification and is applied per
hundred dollars of payroll for that classification.
All new employers purchasing workers comp start out with a 1.00 modification factor.
This means there is no plus or minus (credit/debit) modification adjustment on your
Over time, many employers will begin receiving an NCCI or state modification notice
60 - 90 days prior to their annual renewal date. Your insurance company will also
receive the notice and will adjust your renewal prices accordingly.
An experience modifier rate under a 1.00 factor is a positive experience and means
you will be rewarded for having little to no claims with a credit modifier. A MOD
rate over a 1.00 factor means you are above the industry norm for claims in your
state, based on your class codes.
Here's An Example:
If you receive an experience modification rate notice that indicates your EMOD is
changing to 1.10, it means that your insurance carrier (or any other provider) will
charge you an additional 10% for your workers comp rates. Conversely, a .90 modifier
means you will pay 10% less on your next renewal policy.
Our Workmans Comp Specialists are trained to review and analyze experience
modification rates and worksheets to help ensure that your MOD is accurate and
appropriate. We will work with you on strategies to help you reduce your experience
modifier over time in order to correct prior debit MOD's.
Give us a call today at (888) 611-7467 for a free experience modifier rate review or
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