What is the experience modifier?

What is the experience modifier?

• A. Industry multiplier
• B. Employer-specific multiplier reflecting prior loss experience relative to others in the same industry
• C. A discount based on tenure
• D. A cap on premium

Answer: (B)

The experience modifier, often called the X-mod, is an employer-specific multiplier used in workers’ compensation insurance to adjust the premium based on how a company’s actual loss history compares to others in the same industry. Rating bureaus calculate it from past losses and payroll, relative to the industry average. If a company’s loss experience is better than its peers, the modifier is below 1, which lowers the premium; if it's worse, the modifier is above 1, raising the premium. It serves to reflect risk and encourage safer practices. It isn’t an industry-wide multiplier, a tenure-based discount, or a cap on the premium.

The experience modifier, often called the X-mod, is an employer-specific multiplier used in workers’ compensation insurance to adjust the premium based on how a company’s actual loss history compares to others in the same industry. Rating bureaus calculate it from past losses and payroll, relative to the industry average. If a company’s loss experience is better than its peers, the modifier is below 1, which lowers the premium; if it's worse, the modifier is above 1, raising the premium. It serves to reflect risk and encourage safer practices. It isn’t an industry-wide multiplier, a tenure-based discount, or a cap on the premium.