Whenever the bureau of workers' compensation detects an inaccuracy in the recording or processing of data, records, payroll, claims, or other pertinent items affecting the risk's status, merit-rated modification or premium, such discrepancy shall be corrected. This correction shall be accomplished regardless of whether this entails increasing or decreasing the risk's merit-rated modification or premium rate. The risk or its representative will be advised of any correction and the effect thereof made under the authority of this rule. In cases where two or more employers may be affected by such correction, the same period of adjustment will be applied to all affected employers. The pure insurance principle of sharing liability, as reflected in the basic rate, does not reward or penalize individual employers.
Experience rating is a departure from the pure insurance concept of sharing liability.
It is an incentive system designed to promote safety practices. An employer who has a better than average loss experience receives a credit against the basic rate for its classification, and conversely, an employer who has a bad loss experience is penalized and has to pay a rate higher than the basic rate. Experience rating is a compromise between self-insurance and the pure insurance principle involved with the basic rate. While it can never relieve an employer who has no accidents from paying premium, it can reduce an employer's premium compared with fellow employers within the same classification. To the cost-conscious employer, this is an important factor.