EMR and How It Affects Your Business
Insurance providers use experience rating to evaluate businesses and consequently adjust the premiums they are required to pay. Experience rating is a reflection of losses a business experience in the past, and is based on the assumption that future loss experiences can be predicted by historical loss experiences. Essentially, what this implies is that future losses are anticipated to be more or less like those incurred in the past. Experience Modification Rate is full for EMR, and has a strong impact on businesses. Insurance companies use this number to determine the cost of past injuries and likelihood of future risk. Generally, businesses pay less compensation insurance premiums if their EMR is also low. The industry average of EMR is 1.0, with figures below that being considered low and anything above it high. If an insurance provider pays worker compensation claim for a business, there is a great likelihood that it EMR is greater than 1.0.
To mitigate their risks, insurance companies raise worker compensation premiums for businesses with high EMR. Even though experience ratings of a business remain unchanged for three years, the good news is that they can be lowered. Businesses can successfully reduce their EMR by implementing effective safety programs aimed at preventing injuries and eliminating hazards. No claims can be made by a business to insurance provider if none of its employees get injured. The situation at the workplace however is quite different, since injuries can happen any time, therefore to prevent the EMR from increasing further, proper management and response are a must. To adequately control EMR, it is necessary that businesses have a plan for mitigating worker compensation claims and injuries.
Experience rating offers a good financial incentive for businesses to reduce work-related injuries and losses, for instance through implementation of safety programs. Additionally, employers are motivated to get injured employees back to work as soon as they can. On the insurance providers’ side, experience rating makes sure that adequate premiums are collected to cover all the risks insured by different businesses. To achieve better results, businesses can also hire full-service safety companies to help them control their EMR and consequently reduce overall costs. Particularly with regard to saving money and bidding for work, lower EMR could give businesses a competitive edge over other rivals in their industry. In industries such as construction, construction owners and general contractors are aware of the advantages of low EMR numbers, hence it is normal practice to prequalify companies with lower EMR numbers even before they assess the bids. Therefore, employers can be urged to reduce their EMR numbers to avoid missing out on business opportunities.