Experience Modification Factor Calculator
Calculate a workers' compensation experience modification factor using primary losses, weighted excess losses, expected losses, and a ballast value.
Description
Calculate a workers' compensation experience modification using actual and expected primary and excess losses, an excess weight, and ballast.
Experience Modification Factor helps you calculate a workers' compensation experience modification using actual and expected primary and excess losses, an excess weight, and ballast.
Use this calculator to study the standard structure of an experience rating modification. Primary losses receive full weight, while excess losses are partially credible and the ballast stabilizes results for smaller risks.
When to use Experience Modification Factor
Use this calculator to study the standard structure of an experience rating modification. Primary losses receive full weight, while excess losses are partially credible and the ballast stabilizes results for smaller risks.1
How the calculation works
The numerator combines actual primary loss, weighted actual excess loss, the unweighted portion of expected excess loss, and ballast. Divide by total expected primary and excess loss plus ballast.
M = (Ap + wAe + (1−w)Ee + B) / (Ep + Ee + B) 1Inputs and interpretation
Ap and Ae are actual primary and excess losses; Ep and Ee are their expected counterparts; w is the excess weight from zero to one; B is ballast. All loss values must use the governing plan's definitions.
Assumptions and limitations
This tool does not derive split points, expected loss rates, credibility parameters, caps, or state-specific adjustments. Official experience rating plans can contain eligibility rules and calculation details not represented here, so do not use the result as a filed rating value without the applicable manual.
References
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Commercial Lines Rating Mechanisms, Chapter 15 — Casualty Actuarial Society