Ihab Saad – Experience Modification Rating EMR 2

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.