WCIRB Experience Modification Worksheet

One of the major driving forces behind the rates you pay for Workers’ Comp Insurance is your Experience Modifier. You must learn how to manage your experience so you don’t have unmanageable increases in your Workers’ Compensation Insurance Premiums.

The following is a brief analysis of the WCIRB Experience Modification Worksheet and some insight to what the terms mean and how it is calculated.

Experience Modification worksheets are full of valuable information if you take the time to understand the experience modification formula and how the different variables involved in the formula affect the calculation.

The experience modification factor is a ratio of a company’s actual losses to losses that are to be expected in the operation of a company of like size (payroll) and employment classifications (Class Code). Experience rating doesn’t apply to every business; a company qualifies for experience rating only if its base premium exceeds a minimum set by the state the company is doing business in.

An experience modification factor of 1.00 indicates an average risk. An experience modification greater than 1.00 indicates a risk with greater than expected loss experience, and an experience modification less than 1.00 indicates a risk with a lower than expected loss experience.

The experience period generally consists of three years, ending one year prior to the effective date of the modifier, which is usually the effective date of the policy. For example, a policy effective April 1, 2004 would have its experience modification factor calculated by using payroll and incurred losses based on policy years 2000-2001, 2001-2002 and 2002-2003.

The 2003-2004 policy period is not used in the calculation because the loss information is too new and not yet credible enough to include in the computation. An important note is that the way the modification is calculated; losses don’t begin to factor into the equation until the second year, and will take three additional years before evolving off a company’s current experience modification factor.