What does Experience Rating mean? Read on to discover the definition & meaning of the term Experience Rating - to help you better understand the language used in insurance policies.
Experience rating, in the context of insurance, is a rating method that takes into account the amount of loss experienced by an insured party as compared to the amount of loss experienced by other insured parties with similar characteristics. Insurance companies use it to adjust premium rates typically for Workers compensation and liability policies to reflect more accurately the amount of risk a policyholder actually represents. The assumption is that past losses would continue similarly into the future.
We hope the you have a better understanding of the meaning of Experience Rating.