What is an experience modification rate (EMR)?

The experience modification rate — commonly called the EMR, e-mod, or mod rate — is one of the most important numbers in your tree service business. It directly multiplies your workers' compensation premium, serves as a proxy for your safety record, and increasingly influences your ability to win contracts.

NCCI (or your state's equivalent rating bureau) calculates your EMR by comparing your actual workers' comp claims over a three-year experience period to the expected claims for a company of your size and classification. The experience period uses data from years four through two prior to your current policy year (the most recent year is excluded because claims may still be developing). A new company starts with an EMR of 1.0. As claims data accumulates over three or more years, the EMR adjusts up or down.

The formula weights expected losses (based on your payroll and class code) against actual losses (your claims). It also distinguishes between frequency and severity. The NCCI formula gives more weight to claim frequency than to severity, because multiple small claims indicate systemic safety problems, while a single large claim may be an isolated incident. This means that five $10,000 claims will increase your EMR more than one $50,000 claim, even though the total payout is the same.

For tree service companies under NCCI class code 0106, the financial impact of EMR is enormous. If your base annual workers' comp premium at a 1.0 EMR is $100,000, an EMR of 1.3 means you pay $130,000 — an extra $30,000 per year. Conversely, an EMR of 0.75 reduces your premium to $75,000, saving $25,000. Over the three-to-four-year period that a bad EMR persists, the cumulative cost difference can be hundreds of thousands of dollars.

Beyond premium impact, many general contractors and commercial clients use EMR as a prequalification criterion. An EMR above 1.0 — and in some cases above 0.9 — can disqualify you from bidding on commercial, utility, and government contracts. TCIA accreditation also considers safety record as part of the evaluation process.

Managing your EMR requires a comprehensive approach: implement a formal safety program aligned with ANSI Z133, conduct regular training, report claims promptly, manage open claims aggressively with your carrier, implement a return-to-work program for injured employees, and review your experience modification worksheet annually with your broker to ensure the data is accurate. Errors in the NCCI worksheet — incorrect claims amounts, misclassified payroll, or claims assigned to the wrong policy — are more common than most business owners realize and can be corrected through the dispute process.