Experience Modification

What Does Experience Modification Mean?

Experience modification is a rating assigned by insurance companies to employers based on their past losses and anticipated future losses. This rating influences the workers’ compensation premium offered to the employer. Because the rating directly affects what employers pay each year, businesses with a rating above 1.0 often shop around and compare workers’ compensation insurance quotes from multiple carriers.

Insuranceopedia Explains Experience Modification

An experience modification rating (EMR) is determined based on the class to which an employer belongs, grouping companies of similar size within the same industry. Each company’s rating is compared to the average rating of its class, which is set at 1.0. Companies with an EMR of 1.0 or lower, indicating an average or below-average history of claims and workplace accidents, qualify for lower premiums. Conversely, companies with an EMR above 1.0 (such as 1.1 or higher) are assigned higher premiums due to a high volume of past claims or frequent workplace accidents. EMR is one of several factors that drive overall small business insurance costs, and improvements to workplace safety usually take a few years to show up in the rating since insurers look at multiple years of claims history.