The Experience Rating of Workers' Compensation Risks

A workmen's compensation risk the premium for which is based in part upon the loss ratio developed for the individual risk is said to be experience rated. An experience rate is differentiated from a schedule rate by the fact that, as commonly used, the latter term is confined to a rate based upon a detailed inspection of the physical condition and hazard of the plant of the employer, and of his methods of operation. A merit rate may be either a schedule rate or an experience rate, or it may be a rate based partly upon inspection and partly upon experience. Experience rating is distinguished from profit sharing or mutual insurance by the fact that it has regard to experience under individual policies as distinguished from experience in groups or classes of policies or for the company as a whole.