A construction company's workers' compensation insurance has an experience modification rate (EMR) of 1.15. What does this indicate about the company's safety performance?
Correct Answer
C) The company has 15% more claims than the industry average
An EMR above 1.0 indicates worse-than-average safety performance. An EMR of 1.15 means the company pays 15% more in workers' compensation premiums due to higher claim frequency or severity compared to similar businesses.
Why This Is the Correct Answer
An Experience Modification Rate (EMR) of 1.15 means the company's actual losses exceeded the expected losses for their industry classification. The EMR is a multiplier applied to workers' compensation premiums, where 1.0 represents average performance. An EMR above 1.0 indicates higher-than-average claims experience, resulting in premium penalties. A 1.15 EMR specifically means 15% more claims or higher claim costs than the industry average.
Why the Other Options Are Wrong
Option B: The company has 15% fewer claims than average
This is the opposite of what an EMR of 1.15 indicates. A safety program that exceeds industry standards would result in an EMR below 1.0, not above it.
Option D: The company pays 15% less in premiums than average
This is incorrect - the company actually pays 15% MORE in premiums, not less. The EMR of 1.15 is a penalty multiplier that increases premium costs due to poor safety performance.
Memory Technique
Think 'EMR = Expensive More Risk' when above 1.0, or remember '1.0 is the line' - above the line means above average problems and costs
Reference Hint
Florida Building Contractor's Reference Manual - Chapter on Insurance Requirements and Workers' Compensation
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