Experience Modification Rating As Measure of Safety Performance

Abstract

Workers' compensation insurance is a significant cost component of construction labor. The manual rate for these insurance premiums is state- and trade-specific so the costs can vary considerably between geographic locations and between crafts. Another aspect of workers' compensation that should be understood is the experience modification rating (EMR), which is used to modify the premium paid. This modifier is essentially an incentive for firms to strive for good safety records, as firms with poor safety records will pay higher premiums. Examples have been developed to help clarify the manner in which the EMR values are impacted by different variables. Results show graphically how injury frequency has a larger impact on the EMR computation than does injury severity. The EMR is noticeably reduced when the hourly wages paid are increased. It is also reduced when the total wages paid per year are increased. Findings suggest that some degree of caution should be exercised if two firms are to be compared on the basis of their assigned EMR values.