What Does Experience Modifier Mean?

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What does Experience Modifier mean? Read on to discover the definition & meaning of the term Experience Modifier - to help you better understand the language used in insurance policies.

Experience Modifier

Experience Modifier

A factor developed by measuring the difference between the insured's actual past experience and the expected or actual experience of the class. This factor may be either a debit or credit and, therefore, will increase or decrease the standard premium in response to past loss experience. When applied to the manual premium, the experience modification produces a premium that is more representative of the actual loss experience of an insured. An employer with average experience has a modifier of 1.0 and would pay the manual premium. Employers with poorer loss experience would have modifiers greater than 1.00 and would pay more than manual premium. Those with good experience would have modifiers below 1.00 and pay less than manual premium.

We hope the you have a better understanding of the meaning of Experience Modifier.

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