An experience modification factor above 1.00 indicates what about loss experience?

An experience modification factor above 1.00 indicates what about loss experience?

• A. Better than average loss experience
• B. Worse than average loss experience
• C. Average loss experience
• D. Insufficient data

Answer: (B)

An experience modification factor is used to adjust workers’ compensation premiums based on a company’s actual losses compared to what would be expected for its payroll and job classifications. A value of 1.00 is the baseline, representing average loss experience. When the factor is above 1.00, it means actual losses exceed the expected level, signaling worse-than-average loss experience, which leads to higher premiums. Conversely, a factor below 1.00 indicates better-than-average experience and typically lower premiums. So, an above-1.00 factor correctly points to worse-than-average loss experience.

An experience modification factor is used to adjust workers’ compensation premiums based on a company’s actual losses compared to what would be expected for its payroll and job classifications. A value of 1.00 is the baseline, representing average loss experience. When the factor is above 1.00, it means actual losses exceed the expected level, signaling worse-than-average loss experience, which leads to higher premiums. Conversely, a factor below 1.00 indicates better-than-average experience and typically lower premiums. So, an above-1.00 factor correctly points to worse-than-average loss experience.