In the realm of construction, safety isn't just a moral imperative—it's a financial necessity. Workplace injuries and illnesses not only endanger workers but also inflict staggering costs upon construction companies. According to recent data, the average cost for all claims combined for accidents in the 2020-2021 period amounted to $41,757—a figure that underscores the urgent need for proactive safety measures within the industry.
Experience Modification Rate (EMR) benchmarking evaluates and compares a construction company's EMR score against industry standards and top performers. The EMR is a numerical representation of a company's workers' compensation claims history, used by insurance carriers to calculate premiums.
By benchmarking their EMR, construction companies can identify areas for improvement in safety practices, implement targeted interventions, and reduce workplace incidents' frequency and severity. This enhances worker safety and well-being and translates into lower workers' compensation costs and a better EMR Rating, providing a competitive advantage in the bidding process.
This blog post will cover the following key sections: understanding EMR in construction, the importance of EMR benchmarking, key performance indicators (KPIs), the benchmarking process, and strategies for lowering your company's EMR.
Understanding EMR in Construction
The Role of EMR
In the construction industry, the Experience Modification Rate (EMR) is a crucial metric for tracking workers' compensation claims and injury data. It is used by insurance carriers to adjust a company's workers' compensation premium based on their claims history relative to industry averages.
EMR Data and Calculations
An EMR score is calculated by comparing a company's actual workers' compensation claims costs and payroll data over a specific period (usually three years) against the expected costs for their industry classification. A score of 1.0 represents the industry average, with scores below 1.0 indicating better-than-average performance and scores above 1.0 signaling higher-than-average risk.
Why EMR Benchmarking Matters
Impact of EMR on Premiums: A company's EMR score directly and significantly impacts its workers' compensation insurance premiums. For example, a construction company with an EMR of 0.8 may receive a 20% discount on their premium, while a company with an EMR of 1.2 could pay 20% more than the industry average.
Benefits of Lower EMR: Achieving a lower EMR score not only reduces workers' compensation costs but also provides a competitive advantage in the bidding process. Many project owners and general contractors prioritize working with companies that demonstrate a solid commitment to safety and risk management, as reflected in their EMR scores.
Key Performance Indicators for EMR Benchmarking
Key Performance Indicators (KPIs) are quantifiable metrics used to measure and evaluate the effectiveness of a construction company's safety programs and claims management processes, ultimately impacting its EMR score.
Categories of KPIs: KPIs for EMR benchmarking in construction companies can be categorized into several groups:
Loss Control KPIs:
- Injury frequency rate: The number of injuries per 100 full-time workers or 200,000 hours worked.
- Days away from work (DAWs) rate: The number of days employees miss work due to work-related injuries or illnesses.
- Return-to-work rates: The percentage of injured workers who successfully return to work after an incident.
- Cost per claim: The average cost associated with each workers' compensation claim.
Claims Management KPIs:
- Claim processing time: The average time it takes to process and resolve a workers' compensation claim.
- Claim denial rates: The percentage of claims that are denied by the insurance carrier.
- Claim litigation rates: The percentage of claims that result in legal action or disputes.
Safety Program Effectiveness KPIs:
- Number of safety inspections conducted: The frequency of job site safety inspections and audits.
- Employee participation in safety training programs: The percentage of employees who attend and complete safety training sessions.
- Near miss reporting rates: The number of near-miss incidents reported, indicating a proactive safety culture.
- Data Quality KPIs:
- Error rates in data entry: The frequency of errors or inconsistencies in data entered into the EMR system.
- Timeliness of data entry: The average time between an incident occurring and its corresponding data being entered into the system.
- Completeness of claim records: The percentage of claim records with all required information filled out accurately.
Benchmarking Your Construction Company's EMR
Data Collection Process: Conducting a comprehensive EMR benchmarking exercise for your construction company involves a systematic data collection process.
This includes:
- Identifying relevant KPIs: Based on your company's specific safety goals, risk profile, and areas of concern, determine the most relevant KPIs to track and measure.
- Extracting data: Collect data from your EMR system and other sources, such as safety incident reports, claims management databases, and human resources records.
- Standardizing data collection methods: Establish consistent methods and protocols for data collection to ensure accuracy and comparability across different projects or job sites.
- Data Analysis and Interpretation: Once the necessary data has been collected, it's time to analyze and interpret the results in the context of industry benchmarks. This may involve:
- Calculating and comparing your KPI values against industry standards and best-in-class performers.
- Identifying areas where your safety and claims management performance exceeds or falls short of benchmarks.
- Visualizing data through charts, graphs, or dashboards for easier interpretation.
- Identifying Improvement Areas: By thoroughly analyzing your company's performance against benchmarks, you can pinpoint specific areas that require attention and improvement. These may include injury prevention, claims processing efficiency, safety culture, or data quality.
Strategies for Lowering Your Company's EMR
Based on Benchmarking Findings: The insights gained from your EMR benchmarking exercise will inform the strategies you can implement to improve safety performance, streamline claims management, and ultimately lower your EMR score. Some potential recommendations may include:
- Implementing proactive safety programs and training initiatives: Enhance safety training programs, conduct regular toolbox talks, and promote a culture of safety awareness and accountability.
- Streamlining claims management processes: Optimize claims reporting procedures, establish clear communication channels with insurance carriers, and implement effective return-to-work programs.
- Utilizing data analytics: Leverage data analytics tools to identify high-risk activities, job sites, or worker groups and implement targeted interventions to mitigate risks.
- Investing in EMR system upgrades and data quality improvement processes: Ensure accurate and timely data entry by providing user training, implementing data validation checks, and integrating with other systems for data synchronization.
In the construction industry, where worker safety and risk management are paramount, implementing an effective EMR benchmarking strategy is crucial for reducing workers' compensation costs and enhancing competitiveness. By regularly evaluating and comparing your company's EMR score and related KPIs against industry standards, you can identify areas for improvement, implement targeted interventions, and foster a culture of continuous improvement in safety practices.
Embrace EMR benchmarking as a powerful tool for lowering your company's EMR score, reducing insurance premiums, and gaining a competitive edge in the industry. Take the first step today by assessing your current performance and exploring opportunities for optimization.
