Experience modifier

Definition

The workers comp multiplier set by three years of a business's own claims.

Why It Matters

It travels with the business, which is what makes it a diligence item and not an insurance detail. Above 1.00 it says this payroll has cost its insurer more than the average shop in the same class code, and it is computed from three years of claims with the most recent year left out, so a bad year keeps pricing the premium long after the crew that caused it has gone. It is also the one insurance number a buyer can move: claims age out on a published schedule, so knowing which year drops off next tells you what the premium does without anybody changing anything. Ask for the loss runs and the current rating worksheet before the price is agreed.

In numbers: A crew at $600,000 of covered payroll and a 1.35 modifier pays about 35% more than the identical crew at 1.00, every year the modifier stays there.