Question 92

Experience modification factor is based on the employer's individual loss experience.

The experience modification factor is specifically determined by an employer's individual loss experience over a specified period. This means that an employer's own claims history significantly influences their workers' compensation premiums.

A) insurer loss experience

Insurer loss experience refers to the overall claims history of the insurance company itself, rather than that of the individual employer. Since the experience modification factor is focused on an employer's specific claims, this option is incorrect.

B) employer's individual loss experience

This option is correct because the experience modification factor directly reflects the claims history of the employer. It calculates how the employer's losses compare to industry averages, which ultimately affects their workers' compensation premiums.

C) employer's safety program

While an employer's safety program can influence the number of claims and potentially improve loss experience, it does not directly determine the experience modification factor. Thus, this option is not the correct basis for the factor.

D) the statewide average rate

The statewide average rate is a benchmark used in workers' compensation but does not directly pertain to an individual employer's experience modification factor. This option is incorrect as it does not reflect the employer's specific loss history.

Conclusion

The experience modification factor is crucial for determining an employer's workers' compensation premiums and is solely based on the employer's individual loss experience. Other options, while related to the broader context of workers' compensation, do not accurately describe the basis for this specific factor, confirming that option B is definitively correct.