What is experience rating premium

Experience Rating — as respects workers compensation, the method in which the actual loss experience of the insured is compared to the loss experience that is normally expected by other risks in the insured's rating class. The resulting experience modification factor is then applied to the premium of the insured.

What is experience premium?

An experience modifier is the adjustment of annual premium based on previous loss experience. For instance, three years of loss experience are typically used to determine the experience modifier for a workers' compensation policy. An experience modifier is calculated every year.

How is experience rated premium calculated?

Rating — determining the amount of premium to be paid to insure or reinsure a risk. Guaranteed cost rates are fixed during the policy period.

What is a premium rating?

The easy answer is that any experience modification factor below 1.00 is a good rating. Since 1.00 is average, or neutral, any Emod below 1.00 means that business is performing better than average for other businesses in the same industry and state.