Experience Modification Rate (EMR) and Your Workers’ Compensation Premium

Home | Experience Modification Rate (EMR) and Your Workers’ Compensation Premium

How to Calculate Worker’s Compensation Cost Per Employee

If you’re like most business owners, you probably receive multiple Worker’s Compensation quotes every year. As you look quickly through multiple quotes, you’re looking at the bottom line – how much do they want you to pay this year? While the bottom line is, of course, the most important part – there are a number of factors that play into the final calculation of your company’s workers compensation insurance costs. These include your class premium (standard premium), experience premium (experience modification or X Mod), modified premium, discounts and credits, and additional fees/expenses. Once the total premium is calculated, various discounts can be applied for different companies to lower the annual cost of your workers compensation insurance.

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The total class premium or standard premium is your total base premium calculated by using your workers compensation class codes and payroll. This will be your annual premium before any additional fees or expenses are added on, and before any discounts or credits are taken out. This data point is made up entirely by your class codes and payroll – so the only way to impact this part of your quote would be to change the work your employees are doing and/or change the number of employees. Given your employees and their class codes, this calculation is otherwise pre-determined by the insurance company’s rates for each class code.

The experience premium is the total amount that will be added on to your base premium, solely because of your experience modification. This is why the experience modification (X Mod) plays the most direct role in how much your company pays for workers compensation insurance. By reducing your experience mod, you can have the most significant impact on your final Work Comp premium. By the same token, an increase to your X Mod will mean the most significant increase to your final premiums owed.

The modified premium is simply the sum of your total class premium and your experience premium.

Next, the carrier will apply premium discounts. These are usually based on loyalty (if you’re renewing with the same carrier) or safety (if your company has a thorough safety program). Whiteboard’s triage response, safety partner program, and documentation resources ensure that all of our clients receive maximum safety discounts from any carrier.

From this point, each carrier will add/subtract additional fees or expenses depending multiple factors, such as what type of work you are doing, the location of your business, and more. Some examples of additional fees include foreign terrorism coverage or catastrophe coverage.

Once the premiums are added together and the discounts are subtracted, the policy total estimated cost is what your company will be expected to pay for the year.

It’s important to notice that there are two areas in a Work Comp quote that you can really control (without reducing your work force). These two are the safety credits and the X Mod. Whiteboard (and any reasonable broker) should be able to help ensure that you’re maximizing safety credits each year. The most significant impact on your premiums will come from the X Mod reduction – so this is what Whiteboard focuses our entire process around. We’re the most experienced and the most equipped to ensure that your X-Mod is as low as possible going into each renewal.

July 29th, 2021

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