Knowledge Corner

An experience modification rating (EMR or Mod Rate) is a strong influencer when determining a construction company’s risk. It uses information from past workers’ compensation claims to determine a company’s chance for future risk. Many construction projects will require companies to have a 1.0 average EMR or lower. 

With so much reliance on a mod rate, contractors are finding it more difficult to find acceptable work in their industry. Regardless of a high or low EMR, here are some of the additional factors that are costing contractors job opportunities.

What other factors are considered?

While a company’s experience modification rate has an influence when measuring risk, it isn’t the be-all-end-all of measuring safety. Some construction companies are making the mistake of believing their experience modification rate is the only determinant when qualifying them for a job. The truth is, insurance carriers also look at other factors, such as:

• The type of business
  • Is your business work considered high risk?
• Specific project
  • What kind of project of you working on?
• Project location
  • Where is the project located?

These factors can vary based on the project your company is currently bidding on.

Check your Existing Workers’ Comp Claims

Reducing an experience modification rating can take a lot of time, especially since it’s based on a three-year claim history. Addressing workers’ comp claims is a top priority when lowering your EMR.

In the event of an employee injury, claim costs can be reduced if the employee doesn’t file for disability. Some states may even offer a reduction on costs if an employee returns to work (in a different role) and doesn’t file for a disability. Keep track of your company’s information that is provided to The National Council on Compensation Insurance (NCCI). This will ensure that it reflects the amount paid on the claim, not the reserve amount.

The reserve is the amount of money that is set aside by the company to pay the cost of a workers' compensation claim. This is the dollars necessary to pay the financial and legal obligations of the self-insured employer or the insurer.

Overall make sure your EMR is being affected by paid losses and not incurred losses (which is the reserve amount). This is why it is important to have regular claim reviews with your Broker. Your Broker will work with the adjusters to mitigate potential loss as much as possible.

It’s important to check your existing workers’ comp claims to see if there is additional money that was set aside in the reserves but is not actually needed. Speak with your Insurance Broker to see if this is a way to help lower your EMR! 

image credit: PhuShutter/shutterstock.com