It seems an unfortunate fact that a number of good, safety conscious construction companies are being precluded, or seriously handicapped from bidding/winning projects due to the increasingly common practice by agencies, project owners and general contractors of using the Worker's Compensation Experience Modification Rate (EMR) as a measure of safety performance. EMR is not necessarily a correct indicator of safety performance. EMR is an insurance underwriting tool originally set up to measure an employer's Worker's Compensation claims experience and to adjust pricing accordingly. It also provides employers an incentive to reduce worker's compensation claims and associated costs by establishing effective safety and claims management systems.

Under this system, an employer with a calculated EMR of 1.00 is determined to have "average" loss experience for the governing class of their Worker's Compensation policy. If the factor is greater than 1.00, the employer's claim performance, in terms of frequency and/or severity, is considered worse than average. Conversely, if the calculated EMR is less than 1.00, the employer's claim performance is considered to be better than the average governing class. EMRs are also trailing indicators. They measure the previous 3 policy years of claim costs, excluding the most recently expired policy year. Companies may have enacted many positive changes since those dates to help improve safety and claims management systems.

Good (safe) contractors can see their EMR increase for numerous reasons unrelated to safety. These include:

  • A new rate formula

  • Fewer dollars in the worker's compensation system

  • Payrolls down due to economy

  • Worker's compensation claims that are included in EMR that were unavoidable and may not reflect a "lack of safety"

This content is only available via PDF.
You can access this article if you purchase or spend a download.