Experience rating uses past insurance experience of the individual policy holder to forecast or predict future losses.

Since experience rating offers the prospect of a premium reduction, it provides an incentive for employers to develop safety programs and accident prevention procedures.

As a result, experience rating benefits employers by promoting occupational safety.

Experience rating also benefits employers by producing a net premium cost that reflects the employer’s own potential for incurring claims.

This means that the insurance premium will be appropriate for the protection being provided, using sound insurance principals and all available data.

In workers’ compensation experience rating, the actual characteristics of the individual employer are determined over a period of time, usually three years.

This experience is then compared or contrasted with the average experience as reflected by the manual rate or rates that apply to the employer’s business.

Experience rating takes the average loss experience (manual rates) and modifies it by the individual’s own loss experience.

Consequently, the two primary benefits of experience rating are:
(1) it tailors the cost prediction and final net premium cost to the individual insured closer than the manual rating, and
(2) it provides an incentive for loss prevention.

The average experience modification factor in the CBIA program is 0.83. However, the values for our member companies ranges from 0.58 to 1.90.

If your company can concentrate on improving safety to reduce losses, you can create your own discount on your workers’ comp insurance premium.