Resources & Insights

Not Winning Construction Bids? It Could be Your E-Mod

April 19, 2018

Construction companies, especially smaller ones, hate when it happens, but many large projects and government contracts require them to have an experience modification rate, or EMR, of no more than 1.00.

Construction companies, especially smaller ones, hate when it happens, but many large projects and government contracts require them to have an experience modification rate, or EMR, of no more than 1.00.
CCIG’s Scott Carlson.

The thinking is that a rating above 1.00 would somehow involve a safety risk, and that the lower the EMR, the safer a company’s work practices.

There’s plenty of disagreement over whether this the best and fairest way to look at a company’s safety record and ability to do a job.

Why? Because a company’s EMR is based in part on the size of its payroll. A smaller payroll means fewer dollars to absorb any losses. Thus, a smaller construction firm would potentially see a higher EMR even if its safety record is as good as a larger competitor.

For the record, an e-mod is a numerical expression of a company’s accident and injury record compared with the average among other employers in its industry. More specifically, an e-mod is a ratio of actual to expected losses that occur over a (typically) three-year period: for example, 2018 e-mods are based on loss and payroll data from 2014, 2015 and 2016. (A one-year lag is built into the calculation because the entire cost of claims resulting from serious injuries may not be fully realized for a year.)

In general, a 1.00 EMR is considered average, while a 1.20 EMR would lead to a 20 percent increase in premiums; a 0.80 EMR would result in a 20 percent reduction in premiums. The National Council on Compensation Insurance computes EMRs for all businesses and industries in Colorado.

A high EMR not only hurts a contractor’s ability to land new business but their bottom line, too. Surveys show that more than half of all employers overpay for workers’ compensation insurance, a problem directly linked to miscalculated EMRs.

Changing Your E-Mod

So, what’s a contractor to do? How can they get their EMR in order and avoid getting disqualified from bidding on certain jobs if their EMR is above 1.00?

Here are four important things you’ll want to consider:

  1. If you’re in the construction business – or any business, really – it’s a good idea to start by checking your e-mod score to understand why it is what it is. You’ll want to ask about the data used to calculate your e-mod and whether it is up-to-date and correct. Don’t assume your current agent is doing this for you.
  2. You’ll want to be sure you have a sound safety program in place. That includes providing new employee orientations, refresher training, and remedial training as needed. Also, report injuries early, make sure to maintain safety training records for OSHA reporting, and investigate accidents and near-misses.
  3. You’ll need a return-to-work plan. One of the best ways to help an injured employee recover, and to keep your claim costs down, is to offer them modified work tasks. Modified duty may include modifying a worker’s essential tasks, limiting work hours, changing work conditions or physically modifying the workplace.
  4. Double-check what the insurance company is telling NCCI about your claim. Insurers will set up a reserve to pay for a claim and will often submit that amount to NCCI rather than the actual, possibly lower amount required to resolve a claim. That can end up causing your e-mod to go up more than it should.

There’s more to all of this, of course, but here’s one more important point to keep in mind about your e-mod:

Even employers that do everything right and have no claims can see their e-mods rise. Why? Because if companies in their industry had a bad year, then everyone shares in the pain.

Scott Carlson is a Vice President at CCIG. Reach him at or 720-330-7925.

CCIG is a Denver-area insurance brokerage with the full-service capabilities of a national brokerage. We do more than make sure you have the right policy. We also help you manage your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.

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Related: Why Workers’ Compensation isn’t for Workers Only

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