A contractor's workers' compensation policy has an experience modification rate (EMR) of 1.15. If the base premium is $8,500, what is the actual premium?
Correct Answer
D) $9,775
Actual premium = Base premium × EMR = $8,500 × 1.15 = $9,775.
Why This Is the Correct Answer
Actual Premium = Base Premium × EMR = $8,500 × 1.15 = $9,775. An EMR above 1.0 indicates a worse-than-average claims history, resulting in a premium surcharge. The EMR directly multiplies the base premium.
Why the Other Options Are Wrong
Option A: $8,500
$8,500 is the base premium before applying the EMR. This answer ignores the modification entirely, as if the EMR were 1.0 (average). An EMR of 1.15 always increases the premium above base.
Option B: $7,391
$7,391 would result from an EMR below 1.0 (approximately 0.87), which would indicate a better-than-average safety record and a premium discount. An EMR of 1.15 increases — not decreases — the premium.
Option C: $10,200
$10,200 results from multiplying $8,500 × 1.20, applying a 20% surcharge instead of the stated 15% (EMR of 1.15). This is an arithmetic error using a rounded or incorrect modifier.
Memory Technique
EMR is a multiplier: Actual = Base × EMR. Think of EMR as your safety score: 1.0 is average, below 1.0 is a reward (lower premium), above 1.0 is a penalty (higher premium). 1.15 = 15% penalty on top of base.
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