What is an experience modification rate (EMR)?

The experience modification rate (EMR), also known as a mod rate, compares a company’s claims experience for the past three years with the average of all companies in the same classification. If a company has a better than average safety record, its premium is lowered. If the injury rate is higher than average, the employer’s premium is higher.

An average experience modifier is expressed as 1.00 and simply means that a company will pay 100 percent of its premium. A higher than average experience modifier would be any number greater than 1.00. A company with a 1.43 experience modifier will pay 143 percent of its premium. The 43 percent surcharge reflects the higher than average claims. The experience modifier can also be lower than 1.00. If a company has an experience modifier of .73, it will pay only 73 percent of the premium. This effectively gives that company a 27 percent discount for having lower than average losses, claims, and injuries.

The EMR is recalculated each year using a combined claims history from a three-year rolling period. Each year the rolling period drops off the oldest policy year and adds the most recent policy year. If a company has unusually high claims during one policy year, the EMR will be affected for three years. There is a one-year lag before a year is included in the EMR calculation. The one-year lag is necessary because the entire cost on claims resulting from serious injuries may not be fully realized for a year.

The experience modification rate (EMR), also known as a mod rate, compares a company’s claims experience for the past three years with the average of all companies in the same classification. If a company has a better than average safety record, its premium is lowered. If the injury rate is higher than average, the employer’s premium is higher.

An average experience modifier is expressed as 1.00 and simply means that a company will pay 100 percent of its premium. A higher than average experience modifier would be any number greater than 1.00. A company with a 1.43 experience modifier will pay 143 percent of its premium. The 43 percent surcharge reflects the higher than average claims. The experience modifier can also be lower than 1.00. If a company has an experience modifier of .73, it will pay only 73 percent of the premium. This effectively gives that company a 27 percent discount for having lower than average losses, claims, and injuries.

The EMR is recalculated each year using a combined claims history from a three-year rolling period. Each year the rolling period drops off the oldest policy year and adds the most recent policy year. If a company has unusually high claims during one policy year, the EMR will be affected for three years. There is a one-year lag before a year is included in the EMR calculation. The one-year lag is necessary because the entire cost on claims resulting from serious injuries may not be fully realized for a year.