By now, most construction companies have discovered how much their Experience Modification Rating (EMR) has changed due to the implemented split point changes that took effect January 1, 2013. Additional changes to the split point will be phased in over the next two years.
NCCI’s Experience Modification Rating consists of two primary elements: Frequency or Primary Losses and Severity or Secondary Losses, referred to as Excess Losses on the NCCI Mod Worksheet. Today, these two components are based upon the following criteria:
• Frequency or Primary Losses: Claims under $10,000
• Severity or Secondary Losses: Claims over $10,000
Frequency of claims (primary losses) tends to have a greater impact on the EMR than severity of claims (secondary losses). The schedule for the impending changes is outlined below:
• Frequency or Primary Losses : Claim less than $13,500
• Severity or Secondary Losses : Claim greater than $13,500
• Frequency or Primary Losses : Claim less than $15,000
• Severity or Secondary Losses : Claim greater than $15,000
These changes are affecting the construction industry due to minimum EMR requirements imposed on construction companies by many project owners just to qualify to bid on a project. Because the experience rating period covers prior years’ losses, construction companies did not have the opportunity to implement strategies that may have reduced the impact of the changes before they become effective. There are many strategies that a company may adopt to either lower their EMR or protect their current rating.
The best way to lower or protect your EMR is to prevent accidents. Having a quality safety program is essential to preventing employee injuries. Management’s support and commitment to safety are critical to the success of the safety program. Supervisors should be accountable and responsible for ensuring the safety program is followed. In addition, each employee should have personal responsibility for safe decisions.
When an employee is injured, Return to Work Light Duty Programs (RTW) are still one of the best EMR lowering strategies available. There are many known employer benefits to RTW such as the reduction of fraudulent claims, reduced attorney involvement, saved costs of hiring and training a temporary replacement employee, increased speed of healing and saved medical expenses from a prolonged disability. There is also a less known benefit of RTW that directly affects the EMR. If the employer is successful in bringing an injured employee back to work before any lost time is incurred, the Rating Bureau provides a significant discount in the penalty charged against the employer’s EMR for that claim.
Claims management procedures are another very effective means of lowering or protecting your EMR. This involves setting specific expectations and service requirements for vendors, establishing an injury reporting process, injury treatment, claims reporting guidelines, internal claims handling guidelines and communication protocols for injured employees. Establishing a strong relationship with your medical providers is paramount. Current claim data should be reviewed and analyzed on a regular basis and a thorough accident investigation should take place following any claim.
Another EMR lowering strategy is to hire a competent insurance broker that specializes in the construction industry. The broker should already know the challenges you face and be able to suggest numerous EMR lowering strategies as well as align your company with a compatible insurer or alternative source for financing risk to achieve your goals.