Workers Comp EMR Risk Management Sample Case

EMR, or Experience Modification Rate, is the most direct method of determining the effect that claim history has on the annual premium a business pays for workers’ compensation insurance. In technical terms, it is defined as follows.

The adjustment of annual premium based on previous loss experience. Usually three years of loss experience are used to determine the experience modifier for a workers’ compensation policy. The three years typically include not the immediate past year, but the three prior. Source: http://en.wikipedia.org/wiki/Experience_modifier

An average Workers Comp EMR rate is 1.0. In essence, an average EMR means that the actual losses during a 3 year period is equal to the expected losses for that period. Since EMR functions as a multiplier, a company with an average EMR rate will pay precisely the calculated premium based on industry, number of employees, and other risk factors. From a work safety perspective, it would appear that these companies are effectively but not optimally preventing work injury hazards that drive EMR risk.

A Sample Workers Comp EMR Calculation

Workers’ comp EMR rates are lower or higher if a business incurs total losses that are lesser or greater than expected losses in the applicable 3 year time period.  For example, a company with more losses than expected may have an EMR of 1.1, and thus their premium is 1.1 times the base premium for their business. At the same time, if that business experiences fewer losses over the next 3 year period, their EMR may be 0.9 and they will pay less than the base premium.

Workers Comp EMR rate variations and resulting premiums

Minimum Workers’ Comp EMR and Controllable EMR

EMR values can and often do vary more than 0.1 above or below average.  Each business has a minimum EMR that they can strive to reach in order to pay their lowest possible workers comp insurance premium.  If Company XYZ has a Minimum EMR of 0.85 and a current EMR of 1.1, they have a Controllable EMR of 0.25 [1.1-0.85].  Here is where the bottom line effect should get the attention of business owners, as seen below.

Minimum EMR and Controllable EMR rate combine to provide total workers comp EMR rate

Effective Safety Reduces EMR Risk and Saves Money

Effective work safety and EMR risk management has many positive effects.  Improved morale, hiring and employee retention advantages, lost time reductions, and project timeline improvements to name just a few.  While these factors are difficult to monetize, the bottom line effect of improved workers comp EMR and resulting workers’ comp premium savings illustrates how effective safety can be at providing long term profit advantages and improved cash flow. It’s clear that from a financial perspective, managing work safety is a win-win for businesses of all sizes or strategies.

Learn how to Lower Your Workers Comp EMR

Moving Ahead for Progress in the 21st Century

The 2014 fiscal year marks the completion of MAP 21, the Moving Ahead for Progress in the 21st Century Act.  The act provides funding for surface transportation programs and has been a landmark achievement for improvements in infrastructure and safety in the United States.

The Federal Highway Administration published an update to the status of MAP 21 activities in October  in preparation for the coming year.  MAP 21 is set to end in September 2014.  The following summary highlights the achievements of the program, with respect to topics relevant to highway construction, the trucking industry, and work zone safety.

  • Infrastructure
    • Program Guidance
      • National Highway Performance Program
      • Surface Transportation Program
      • Emergency Relief Program
      • Appalachian Development Highway System
      • Ferry boats
      • Territorial and Puerto Rico Highways
    • Guidance on infrastructure topics:
      • Asset management
      • National Highway System design standards
      • Construction management/general contractor contracting method
      • Buy America (including impact on utility relocations)
      • Stewardship and oversight
      • Collection of element-level bridge data
      • Interstate access justifications
    • Strategy, schedule, and outreach on performance management
    • Supplemental notice of proposed rulemaking on National Tunnel Inspection Standards
    • Guidance and notice of proposed rulemaking (NPRM) on value engineering
  • Safety
    • Guidance on safety programs and related topics:
      • Highway Safety Improvement Program (HSIP) eligibility and reporting
      • Strategic Highway Safety Plan (SHSP)
      • High Risk Rural Roads
      • State safety data systems
      • Penalty transfer provisions
      • Older road users
      • Railway-highway crossings
  • Freight
    • Process for development of National Freight Network
    • Guidance on freight-related topics:
      • Higher Federal share for freight projects
      • State freight advisory committees and plans
    • Guidance and best practices re: special permits in emergencies

For a complete list of MAP 21 initiatives, visit the FHWA website at http://www.fhwa.dot.gov/map21.

The Importance of Fall Protection in Construction: INFOGRAPHIC

The national initiative to improve fall protection measures has been a topic that we have touched on in various posts throughout 2013.  The statistics are eye opening: In 2012, Falls killed more than 1 construction worker every 2 days, and the trend continues to grow.  Have a look at our newest infographic to consider the need for Construction Fall Protection and get started implementing work safety policies to reduce your risk.

The Rent vs. Own Decision and Equipment Investment Safety ROI

In preparation for the 2014 budget, many companies are making strategic decisions related to equipment investment.  The decision often comes down to rent vs. own.  Determining whether a piece of equipment will support multiple projects, considering interest rates, and other basic factors aside, long-term risk and opportunity considerations are a critical decision making variable.  When making equipment investment decisions, market indicators and risk factors must be projected  in order to assess return on investment.  Work safety is an important risk factor to consider, but strategic decisions are based on a variety of factors.

One such factor is illustrated by Oil & Gas Industry growth.

“I never imagined when we acquired Beckwith Machinery in October of ’05 that oil and gas would become a significant contributor to our performance. We had no visibility to it even though the first oil well was drilled in Pennsylvania many years ago,” says Cleveland. “We certainly had no idea how big it would be for us. In the downturn of ’09 there was some talk about oil and gas. And then as 2010 rolled out, that’s what really brought us back from the doldrums. Pad development came on full force throughout 2010 and then a lot of drilling after that.

Source: Rental Equipment Register

Equipment companies in western and central Pennsylvania experienced a market shifting increase in rental demand in 2010 when the oil and gas fracking industry increased by 6 times. Shortly after the 2008 recession it was made public of a successful shale well drill that has placed the region at a level of production to rival Saudi Arabia.  Projections continue to grow for the region as the country seeks a more effective energy plan.

Market Factors Affect Investment Decision Making for Multiple Industry Players

Presented with increased rental service activity as new contractors entered the market, many rental companies invested in new equipment to meet demand.  Investing in drilling pads and related equipment allowed businesses such as Cleveland Brothers  to overcome the recession and claim new market share.

In this case, the Rent or Buy decision could be viewed from multiple perspectives: Rental companies were challenged with the risk and reward of buying equipment to service the growing industry.  Contractors new to the market or region were able to alleviate risk by renting equipment.  Other existing contractors such as heavy/highway construction were provided the opportunity to expand into the market.  The influx of oil and gas industry work also boosted the economy in other markets, such as infrastructure and hospitality, and increased the demand for related equipment such as light towers and work platforms.

Long-Term Strategic Factors and their Relationship to Work Safety

In addition to projected industry demand, long term strategic factors can include

  • Advantages of new equipment with respect to technology and regulations
  • Supply/demand and price points of rental equipment
  • Labor availability and expertise
  • Equipment maintenance and repair needs
  • Capability to apply internal resources for unique needs
  • Safety factors for aging equipment and as scale grows

Each of the above long-term strategic decision making factors can be applied to safety equipment investments.  New equipment is typically equipped with more current safety features, thus purchasing or renting newer equipment will often provide safety risk management ROI.  This will reduce the liability of lost worker time and the frequency of equipment repairs, freeing up resources for profit driving activities.  Overall, the rent vs. own decision will be based upon a variety of industry factors, but business owners and executives should also factor in safety to optimally assess the ROI decision.

OSHA’s Fall Prevention Campaign: Ladders

In previous posts, we have discussed the importance of Fall Prevention and the national focus on providing training, guides, and resources in support of this fall protection safety risk management. Falls are the leading cause of death in construction and a frequent safety issue in many other industries. Even falls at minimal height can result in broken bones, lost worker time, and worker’s comp injury claims.  Nearly a third of fall fatalities in construction are falls from ladders.

Recently OSHA has produced several resources to provide guidance to safety managers with respect to ladders. Specific guidelines include:

  • Use the right ladder for the job
  • When using a ladder to access another level, secure and extend the ladder at least 3 feet above the landing point
  • Wear proper footwear
  • Place the ladder on stable and level ground
  • Ensure that the ladder is fully extended before accessing
  • Prevent passersby from walking under or near ladders while in use
  • Do not work on the top rung of the ladder
  • Maintain three points of contact at all times
  • Do not carry tools or materials while using a ladder
  • Do not lean on the ladder while working and keep your weight centered
  • Do not use ladders near accessible doorways
  • Check, maintain and safely store ladders
  • Do not use faulty ladders: bent, missing a step, or unable to be locked open

In addition, the California Department of Industrial Relations provides additional resources for specific ladder requirements, including design and construction (complete with ANSI regulations); ladder types and proper ladder selection; care, use, and maintenance; and employee training.

ANSI: Follow the Proper Guidelines

The number of variations between ladder designs, applications, and composition is nearly as unique as the people that use them.  It can be difficult to determine the applicable ANSI standard and rating that applies to each ladder at a workplace.  As an example, the ANSI category for portable metal ladders (ANSI-ASC A14.2-2007) covers a wide range of ladders, and excludes others that may seem to fit the category:

Ladder styles include ladder type step stools, portable extension, step, trestle, sectional, combination, single, platform, and articulating ladders, but excluding ladders in and on mines, the fire services, mobile equipment, hoisting equipment, work platforms, antenna communications towers, transmission towers, utility poles, and chimneys. It does not cover special-purpose ladders that do not meet the general requirements of this standard, nor does it cover ladder accessories, including, but not limited to, ladder levelers, ladder stabilizers or stand-off devices, ladder jacks, or ladder straps or hooks, that may be installed on or used in conjunction with ladders.

The importance of being informed to prevent falls from ladders and conform to trending OSHA regulations is clear.  For details about requirements for your workplace access equipment, visit the ANSI website or contact a safety professional.

Examining Safety at Top Contractors

The Engineering News Record recently published a list of the Top 400 Contractors.  At companies with $10-$30 billion in revenue, the number and size of contracts justifies a dedication to worker safety that small to mid sized businesses can emulate to help shorten the learning curve. Safety is deeply integrated into each of the Top 3 contractors’ day to day business policies and organizational culture.  Contracting firms that strive to achieve success may observe this theme as motivation to implement safety at the highest level to increase revenue and support growth.

Bechtel

At Bechtel, the safety goal is Zero Accidents.  Safety is integrated into each project via technical field procedures and extensive training.  Each employee has ‘stop-work authority’ if they feel a job responsibility is potentially unsafe.  To incenitivize safety and communicate its importance to employees, Bechtel provides multiple awards for exceptional safety performance and innovation.

Fluor

Fluor’s commitment to safety includes a “ZERO incidents” policy. Fluor has received recognition as one of America’s top safety companies by demonstrating excellence in “support from management and employee involvement, innovative solutions to safety challenges and effective training programs.” One such program is the Field Audit system, a proactive approach to identify and mitigate work hazards.

Kiewit

Kiewit has instituted and follows a ‘Nobody Gets Hurt’ policy.  Kiewit is focused on preventing even the most minor injuries through  employee engagement throughout the organization coupled with a supporting management commitment.  “Safety training, observation programs and job hazard analyses” help to support this vision.

Innovative Access Solutions

Innovative Access Solutions provides safety equipment to each of the Top 3 contractors listed above.  In addition to the Trucker series of trailer access products, IAS provides custom access solutions for remote locations, unique jobsite requirements and more, in support of construction work safety policies.  To request information about safety equipment from Innovative Access Solutions, click here.