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A Comprehensive Guide to Experience Modification Factor (EMF)


The Experience Modification Factor (EMF) is a crucial factor in determining the cost of workers’ compensation insurance for businesses. As an employer, it’s important for you to understand how the EMF is calculated and how it impacts your workers’ compensation premiums. By understanding this factor, you can take steps to manage your losses and control your insurance costs.

The Purpose of the Experience Modification Factor

The primary purpose of the EMF is to incentivize employers to prevent workplace injuries and illnesses. It measures a company’s actual losses compared to the expected losses for their industry. A ratio greater than 1.00 indicates that a company’s losses exceed the industry average, while a ratio less than 1.00 indicates that the company’s losses are better than the industry average.

How EMF Impacts Workers’ Compensation Premiums

An EMF ratio greater than 1.00, known as a debit mod, results in higher premiums as it indicates that a company’s losses are worse than expected. Comparatively, a ratio less than 1.00, known as a credit mod, results in lower premiums because it indicates that a company’s losses are better than expected.

Calculating the EMF

The EMF is calculated using a formula that compares a company’s actual losses to the expected losses for their industry.

Experience Modification Factor= Actual Losses/Expected Losses

Actual losses are divided into primary losses and excess losses.

Primary losses represent claim frequency, while excess losses represent claim severity. Excess losses have a lower weighting in the EMF formula. The formula takes into account the total dollars paid on each claim and whether indemnity payments (lost wages) are made on each claim.

The split point is the threshold that separates primary and excess losses. The split point has increased over the years, and its value varies by state. Claims below the split point are considered primary losses, while claims above the split point are classified as excess losses.

Factors Impacting EMF

Rapid Claim Reporting

Reporting claims promptly is crucial in controlling the EMF. Rapid claim reporting allows for quick and efficient claims resolution. Employers should report claims to the centralized Claims Reporting Center within 24 hours. Prompt reporting allows insurance carriers to handle claims more effectively and mitigate potential costs. By reporting claims swiftly, you can demonstrate your commitment to managing workplace injuries and illnesses, which can positively impact your EMF.

Stay At Work/Return to Work (SAW/RTW)

Implementing a Stay At Work/Return to Work (SAW/RTW) program can have a significant impact on reducing loss costs and controlling the EMF. Providing temporary alternative work at regular wages for injured employees not only promotes their recovery but also minimizes the cost of claims. By offering modified duties, you can eliminate or minimize indemnity payments, thus reducing the primary loss amount used in calculating the EMF.

Managing Workplace Injuries & Illnesses

Preventing workplace injuries and illnesses is always a priority. While not all incidents can be prevented, you should focus on proactive measures to minimize risks. Implementing effective safety programs and providing ongoing training to employees can help prevent injuries and reduce claim frequency. Additionally, having a comprehensive claims management program in place allows you to manage outstanding reserves and efficiently resolve open claims. By actively managing workplace injuries and illnesses, you can control costs and positively impact your EMF.

Maximizing Cost Control in Workers’ Compensation

  • Interpreting the Current EMF: You need to understand what your current EMF indicates and how it affects your premiums. A higher EMF indicates higher losses and results in higher premiums. Lowering the EMF through effective loss control measures can lead to cost savings.
  • Understanding the Minimum EMF: The minimum EMF represents the hypothetical EMF if there were zero losses for the rating period. Calculating the minimum EMF provides insight into the potential for cost reduction.
  • Controlling the Controllable EMF: By implementing robust loss control measures, such as safety programs, effective claims management, and SAW/RTW programs, you can reduce your controllable EMF. These measures directly impact claim frequency and severity, leading to lower losses and potentially lower premiums.


Q: What is the Experience Modification Factor? (EMF)

A: The Experience Modification Factor is a numerical representation of a company’s loss experience compared to the expected losses for their industry. It is used to determine workers’ compensation premiums. A ratio above 1.00 indicates worse-than-average losses and a ratio below 1.00 indicates better-than-average losses.

Q: How is the EMF calculated?

A: The EMF is calculated by dividing the company’s actual losses by the industry’s expected losses. It takes into account factors like claim frequency, claim severity, and the split point between primary and excess losses. The formula is more complex, but the basic concept involves dividing the actual losses by the expected losses.

Q: What factors influence the EMF?

A: The EMF is primarily influenced by a company’s loss experience, including the frequency and severity of claims. Other factors, such as the split point, primary losses, excess losses, and the Experience Rating Adjustment (ERA) also play a role in the calculation. Prompt claim reporting and providing temporary alternative work for injured employees can positively impact the EMF.

Q: Why is the EMF important for businesses?

A: The EMF is important because it directly impacts a company’s workers’ compensation premiums. A higher EMF leads to higher premiums, while a lower EMF can result in cost savings.

Bill Sheldon

Bill Sheldon's Bio

Bill has over 20 years of experience in the property and casualty industry working for two large regional carriers in sales, marketing and underwriting. Cincinnati Insurance Companies (Senior Regional Director, Regional Director, Field Rep., State Agent) for 13 years. Auto Owners Insurance (Commercial lines underwriter and Marketing representative) for 4 years. Bill’s commercial lines underwriting and sales experience affords him a unique perspective on writing large and small commercial risks.