Ihab Saad – Experience Modification Rating EMR 2
AI: Summary ©
The EMR is crucial for identifying employees and ensuring safety, and it's used to determine worker's compensation rates. The speaker emphasizes the importance of keeping an insurance premium low to maximize the chances of winning a bid. The EMR compares companies for workman's compensation rates, with one being the industry average and a starting date that would have insurance and experience modification ratings of 1.0. The risk assessment for each employee is different, and the point eight EMR is going to reduce their premium by $13,200. The difference between winning and losing bids for insurance policies is discussed, emphasizing the importance of staying safe.
AI: Summary ©
Music. Welcome to this short presentation about experience
modification rating or EMR. So today we're going to learn about
what is EMR and what's its importance, and why is it
important to calculate it for a construction firm.
So what's EMR understanding your it's basically experience
modification rating. That's what EMR is. Understanding your
experience modification rating or EMR, and monitoring it regularly
is a key in reducing your workers compensation costs. As an
employer, you're gonna pay an insurance premium to insure your
workers against work injuries, and that's called workers insurance,
workers compensation. It's also an excellent measure of how you your
loss prevention and control practices stack up to others in
your industry.
Imagine two identical contractors, one of them having a good safety
record and one of them having a not so good safety record.
Should they be treated equally? Of course, not. How are we going to
distinguish between them? First of all, in their past experience,
when they are applying for a new job, they have to show the
clients, or smart clients ask for a safety record to compare the
track record of that contractor. If that contractor is deemed to be
unsafe, then the client would not award their job to them. It would
be one of the pre qualification criteria or one of the evaluation
criteria. Now, from a bottom line standpoint, does it pay to be
safe? This is basically what we're going to see through this
presentation. I education
companies who effectively manage their safety programs not only
understand how this works, but also have assigned someone to
monitor this on a regular basis, so someone, usually in the office,
is monitoring their EMR. Is it going up or down? Is it staying
flat, etc, it has a direct correlation to how much you pay in
workers compensation premiums, therefore a direct effect on your
overhead and ultimately the total bid price. And this is where it's
very important, because if you are in a very tight job market, and
you're trying to save as much money as you can, and you're
trying to bid as low as you can to maximize your chance of winning
the bid. Then in this case, saving on that workers in compensation
premium that you're paying is definitely going to help you
achieve that goal.
Many safety conscious corporations are refusing to use the service of
vendors or subcontractors who do not control their experience
modification rating or have an experience modification in excess
of the industry average, which shows that they have a bad safety
track record, at least worse than the industry average.
So the EMR compares companies nationally for workman's
compensation rates, a rating of one is the industry average, and
that's for a new company. A company that starts today would
have an insurance and experience modification rating of 1.0
a company that has been in the business for 10 years should have
an EMR lower than 1.0 if it still has one point or even above more
than one as their EMR, that means they do not have very good safety
track record.
So value is greater than one for companies with poor records,
because the more accidents you have, the more injuries that are
reported or recorded, then this is going to have an impact directly
on your EMR.
Values of less than one are for companies with good records,
because, again, if you keep working for a certain number of
hours per year or certain number of years without without having
any reported accidents or injuries, then this is going to
reduce your EMR. Think about it as your insurance premium that you
pay for your vehicle, for your car, the more accidents you have,
the more traffic tickets or speeding tickets you have. That's
going to increase your insurance the more years you have without
any accidents or any tickets, then that's going to reduce your
insurance premium.
DMR helps determine workers compensation compensation
insurance premiums. How is it calculated? Simply speaking your
your EMR compares your workers compensation claims experience to
other employers of similar size operating in the same type of
business. So is comparing apples to apples, most employers who have
an annual premium in excess of $3,000
will receive an EMR by the insurance company. Your EMR is
calculated by the National Council on compensation insurance and CCI
or.
In some states, an independent agency, your independent insurance
agent, can advise you where yours is calculated. So depending on
your company where you're working, who is going to calculate your
EMR? In general, each year, insurance carriers report to the
calculating agency your class codes, payrolls and losses for the
last five years. The computing agency uses three complete years
of data ending one year prior to the effective date of the rating
period. Now this is very important. Accidents that you have
had last year are not going to be reflected on your EMR.
They're going to be reflected on next year's EMR. Accidents that
you had, that you have this year would not be reflected in next
year's EMR. They're going to be reflected in the following year.
So they have a long staying effect. So for example, a rating
in 2005
will normally not use 2004
but would use 2003 2002 and 2001 so right now, for example, for
2013 it's not going to use 2012 your track record in 2012 is not
going to affect your EMR for 2013 it will, however, affect it for
2014
so for 2013 it's based on 2011
10 and nine.
While the format may appear complex, it compares your specific
payrolls and losses to the industry average losses for like
business of similar size. If you are at in this at the industry
average, your your EMR is going to be one. If your experience is 20%
better than average, then your EMR is going to be 80.8
or if it's 20% worse than average, going to be 1.2 now, what kind of
class, classes of employees? Is it documenting all the employees? But
is someone gonna say, for example, that the the risk of a steel
connector? Who
erect structural steel for a high rise building, is the risk they're
going to be exposed to is the same as someone doing doing a clerical
job in an office. Of course, not so again, it's going to have for
each one of these different jobs is going to have a certain risk
assessment, and the premium is going to be corresponding to that
risk assessment. So for that steel person is going to be much higher
than someone doing a clerical job.
It makes sense to reward companies that practice effective safety and
claims management techniques over those who do not. In effect, the
EMR just does that. An example below illustrates the difference
between a company with a point eight EMR versus a 1.2 EMR. So the
two companies have exactly the same payroll
for the same class of employees.
The rate per $100 is 8.25
so the premium is going to be 8.25 times 800,000 that's 66,000
for the EMR of point eight. That's going to reduce your premium by
$13,200
therefore, what you're going to be paying actually is 52,800
versus someone who has an EMR of 1.2 that's going to add $13,200
which makes their payments 79,200
look at the big difference between these 270 9050
2000 so we're talking about
$27,000
just in insurance premiums. Difference that can make a
difference between a winning bid and a losing bid.
How do I get it technically? Receive an EMR sheet each year
prior to your policy renewal date,
if you are unclear of your company's current EMR, your
insurance agent can help you locate this. Your EMR is also
listed on the declarations page of your workers compensation policy.
So this is where you can find it.
Again, looking at an example here two identical companies,
one having carpenters. The payroll for the carpenters is $200,000
and the workers comps is $13 per $100 per of the payroll. So the
insurance cost is $26,000 for the carpenters electricians, it's $5
per $100 of the payroll. So it's 2500 masons, it's $6 per $100 so
obviously, in this case, the carpenters are deemed to be their
job is more risky than that of electricians or Masons. Your total
payroll is 330,000
so.
Your insurance cost is $33,300
based on this,
if you have an EMR of point seven. So point seven of the 33,300
that's 23 310
appoint an EMR of 1.2 1.2 times 33 300 that's 39,960
so again, that enforces the same idea that we've seen in the
previous slide, which is, if you have a good EMR below one, that's
going to make a big difference from having an EMR greater than
one.
So the difference between the two is going to be $16,650
which is basically, again, can make the difference between a
winning bid and a losing one. Remember that the EMR is
calculated using a company's asset records for the first three of the
last four years of operation. Therefore your em iPhone EMR for
the current year does not consider your record for the last year only
the three years prior to last year. So this is basically our
introduction or our discussion about EMR that you need to know
about, and you need to know how it's calculated, and what's the
impact of having a good safety record on the bottom line of your
company, especially when it comes to paying for insurance. Stay
safe, and I'll see you in another presentation. You.