Modified standard premium minus volume discount equals reported or final premium due. The law prohibits employers from deducting or obtaining any part of the premium from employees. Experience modification also combines the experience of businesses with common majority ownership. When a business changes ownership, experience typically follows to the new owner for experience modification calculations. The ratio, or experience modification factor, either increases or decreases the final premium.
Experience rating recognizes employers with effective safety programs and good loss experience.
NCCI calculates experience modification factors for private insurance carriers and the State Fund. NCCI uses State Fund developed expected experience for the fund s insureds. Experience modification is not optional. It is applied to all qualified firms, whether insured by private insurance carriers or the State Fund. An employer qualifies by meeting appropriate manual premium thresholds.