Employees are the most valuable assets of any business. Employers are not just ethically responsible for protecting their worker well-being, but also legally responsible. It is a legal compulsion for businesses to avail of worker compensation insurance in India. In this, we decide the coverage and compensation as per the provisions of the Workmen Compensation Act, 1923.
The workers’ compensation cost may vary for businesses depending on various factors the insurance companies consider for premium calculation. Experience modification rate (EMT) is a crucial element that insurance companies consider for workers comp premium calculation. This article, lets you understand the impact of experience modification rate (EMR) on workers’ compensation policy.
What is the Experience Modification Rate (EMR) in worker compensation?
Experience modification rate is a numerical factor or rating tool employed by the workers’ insurance compensation system. The EMR rating reflects the company’s workers’ compensation history and safety record over the last few years.
How is the Experience Modification Rate (EMR) calculated?
The calculation of the experience modification rate is based on the actual worker compensation claims history. The Workmen Compensation Council examines workers’ compensation claims reported over the last few years to rate the business. The actual worker compensation claims made by the business are compared to the expected claims for the businesses within the same industry. We also consider the size of the business for comparison. The ratio of the company’s actual loss for workers’ compensation to the expected loss is the experience modification rate.
What constitutes a favourable Experience Modification Rate (EMR)?
The average experience modification rate is 1.0, which means the actual loss is the same as that of the expected loss. That means the business is not more or less risky compared to businesses of similar size in the same industry.
Generally, an experience modification rate below 1.0 is considered good, and an experience modification rate above 1.0 is considered bad. That means businesses with EMR below 1.0 are considered safer or less risky than businesses with an EMR above 1.0.
Impact of Experience Modification Rate on Worker Compensation Policy Premium
Insurance companies consider businesses with an experience modification rate below 1.0 as safer, the premium on compensation policy is relatively lower for such businesses. As insurance companies consider businesses with an experience modification rate above 1.0 as riskier, the premium on compensation policy is relatively higher for such businesses.
Experience modification rate is a critical factor for businesses when seeking WC policy online. It could also matter when it comes to brand image in the market and to get a particular project over a competition. Experience modification rate reflects businesses’ safety standards and the importance given to risk management.
Benefits or Uses of Experience Modification Rate (EMR)?
You can use the Experience Modification Rate for the following purposes:
- Businesses can utilise experience modification ratings as a tool to assess their own safety standards, protocols, and measures. Businesses with low experience modification rates need to continue maintaining the effective safety measures already in place. On the other hand, businesses that have higher experience modification rates can evaluate the existing safety practices and work on the improvements.
- A good experience modification rate reduces the cost of worker compensation policy for businesses. Workers’ compensation insurance is an effective risk management tool that is mandatory for businesses. It protect the well-being of their workers in case they suffer an injury, death, disability, or illness due to unforeseen events at the workplace.
If the businesses believe their experience modification rate is inaccurate, they can approach the concerned authority and make an appeal.
Conclusion
To sum up, the experience modification rate plays a crucial role in getting the workers’ compensation policy at a reduced premium cost for the businesses. Having good safety measures and evaluating the safety practices in a timely manner for further improvement is an important part of a business’s risk management strategy.
