How the experience-mod (EMR) formula works
A plain-English walkthrough of the arithmetic behind your workers’ comp EMR — with a fully worked example.
Expected losses: what a business like yours “should” lose
For each class code on your policy, the state files an expected loss rate (ELR) per $100 of payroll. Multiply payroll by the ELR, sum across classes and years, and you get expected losses — the yardstick your actual claims are measured against. A filed D-ratio then splits that expectation into a primary layer and an excess layer.
The split point: why small claims count more
Each actual claim is divided at the state’s filed split point: dollars below it are primary losses, dollars above are excess. Primary losses enter the formula at full weight; excess losses are heavily discounted. That is the design insight of the plan — claim frequency predicts future losses better than claim severity — and it is why one large claim often moves your EMR less than several mid-sized ones.
Caps and stabilizers
A state accident limitation caps how much any single claim (or accident) can contribute. A ballast value is added to both the numerator and the denominator, which pulls smaller employers toward 1.00 — by design, a small employer’s mod responds less to any single year. A weighting value sets how much of the excess layer counts, growing with employer size.
The formula itself (NCCI states)
Mod = [actual primary + W × actual excess + (1 − W) × expected excess + ballast] ÷ [expected primary + W × expected excess + (1 − W) × expected excess + ballast]
Independent-bureau states (California, Pennsylvania/Delaware, New Jersey, Minnesota and others) file structurally different plans — not just different numbers.
A worked example — illustrative round numbers
Every value below is invented for teaching. It is not any state’s filed value and not a computed result for any real business.
- Payroll $5,000,000 in one class at an ELR of 2.00 → expected losses E = $100,000.
- A filed D-ratio of 0.40 → expected primary Ep = $40,000; expected excess Ee = $60,000.
- One actual claim of $8,000, below a $20,000 split point → actual primary Ap = $8,000; actual excess Ae = $0.
- With weight W = 0.20 and ballast B = $50,000: numerator = 8,000 + 0 + 0.80 × 60,000 + 50,000 = $106,000.
- Denominator = 40,000 + 0.20 × 60,000 + 0.80 × 60,000 + 50,000 = $150,000.
- Mod = 106,000 ÷ 150,000 = 0.71 — a credit mod: actual losses ran well under expected.
The real computation uses your state’s filed, effective-dated values — which change every year. The current filed split points and accident limitations we have sourced are published in the free lookup, with provenance. See your state’s filed values →
What these numbers are — and aren’t
Feature availability varies by jurisdiction. A feature is not available merely because it appears in a demonstration, design, documentation page, or another state.
Final insurance, premium, classification, rating, audit, and experience-modification determinations are made by the applicable carrier, rating bureau, regulator, or other authorized party—not by Premwise.
A number labeled “Premwise recomputation,” “scenario,” “estimated,” or “potential” is not a filed, issued, accepted, or final number.
Educational material — not legal, insurance, or financial advice.
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