Experience Factor Calculation Compares Actual to Expected Losses

The Experience Modification Factor calculation is a comparison of the firm's Actual Losses and the firm's Expected Losses. The Experience Modification Factor is calculated as:

  Credible Actual Primary Loss + Credible Actual Excess Loss  
Expected Loss

The numerator is the firm's Credible Actual Loss (Credible Actual Primary Loss plus Credible Actual Excess Loss) and the denominator is the firm's Expected Loss.

If the firm's Credible Actual Loss is less than the firm's Expected Loss then the Experience Modification Factor will be less than 1.0. In this case the firm is expected to have lower costs per unit of insurance exposure (usually hours) than the average firm in its class.

If the firm's Credible Actual Loss is greater than the Expected loss then the Experience Modification Factor will be greater than 1.0. In this case the firm is expected to have higher costs per unit of insurance exposure than the average firm in its class.

This Experience Modification Factor formula is shown in the WAC 296-17-855 (www.leg.wa.gov).

Note: The final Experience Modification Factor may be different than the factor calculated above if the firm has a Compensable-Claim-Free Experience Rating or if the Limitation on Annual Changes to the Experience Factor applies.

End of main content, page footer follows.

Access Washington official state portal

© Washington State Dept. of Labor & Industries. Use of this site is subject to the laws of the state of Washington.