The Experience Modification Rate (EMR) Calculator is a specialized tool used by businesses to estimate their workers’ compensation insurance premiums. EMR reflects a company's workplace safety record by comparing actual losses to expected losses. Insurance providers use this number to adjust premiums—lower EMRs mean lower premiums and indicate better safety performance.
This calculator helps employers stay informed and proactive. By understanding their EMR, businesses can work to improve workplace safety and reduce costs related to workplace injuries. It's a vital part of financial planning in industries with significant physical labor, like construction, manufacturing, and logistics.
formula of Experience Modification Rate (EMR) Calculator
EMR = (Actual Losses + Stabilizing Value) / (Expected Losses + Stabilizing Value)
Where:
- EMR is the Experience Modification Rate. It’s a dimensionless figure, often shown to three decimal places (like 0.95).
- Actual Losses are the total of claims filed during the experience period, divided into:
- Primary Losses: Lower severity claims, capped at a set limit
- Excess Losses: The part of large claims that exceed the primary cap
- Expected Losses are what a company is expected to lose, based on industry, size, and risk class
- Stabilizing Value is a constant that reduces EMR swings due to small company sizes
Sub-formulas:
Actual Losses = Σ (Primary Losses + Excess Losses)
Expected Losses = Payroll × Expected Loss Rate
This gives us the fully expanded formula:
EMR = [(Σ Primary + Excess Losses) + Stabilizing Value] / [(Payroll × Expected Loss Rate) + Stabilizing Value]
Each part is determined using industry data and payroll records, and values are usually calculated with the help of insurance rating bureaus such as NCCI.
Table of Key EMR Benchmarks
| EMR Value | Interpretation | Impact on Premiums |
|---|---|---|
| 0.80 | Excellent safety record | 20% discount on insurance |
| 1.00 | Industry average | Standard premium |
| 1.20 | Worse than average | 20% increase in premium |
| 1.50+ | High-risk profile | Significantly higher premium |
| Term | Description |
|---|---|
| Primary Loss Cap | Max value for a claim to be counted as primary |
| Expected Loss Rate | Loss estimate per $100 of payroll |
| Experience Period | 3-year window excluding the most recent year |
Example of Experience Modification Rate (EMR) Calculator
Imagine a company with the following data:
- Payroll: $2,000,000
- Expected Loss Rate: 0.02 (or $2 per $100 of payroll)
- Actual Primary Losses: $30,000
- Actual Excess Losses: $10,000
- Stabilizing Value: $5,000
Step 1: Calculate Expected Losses
Expected Losses = 2,000,000 × 0.02 = $40,000
Step 2: Calculate Total Actual Losses
Actual Losses = 30,000 + 10,000 = $40,000
Step 3: Plug into the formula
EMR = (40,000 + 5,000) / (40,000 + 5,000) = 1.00
This company has an EMR of 1.00, which means it is exactly in line with the industry average. If they reduce losses, their EMR will go below 1.00 and their premiums could decrease.
Most Common FAQs
This is a business insurance calculator that helps you determine your workers' compensation risk modifier. It's especially useful for small to mid-sized companies in high-risk industries.
Yes. An EMR below 1.00 shows your company is safer than average, which often leads to lower insurance premiums.
Absolutely. You can improve your EMR by reducing workplace accidents, reporting claims accurately, and implementing a strong safety program.