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📋 '''Experience-rated''' describes an insurance pricing approach in which a policyholder's own [[Definition:Loss | loss]] history directly influences the [[Definition:Premium | premium]] charged, rather than relying solely on broad [[Definition:Classification rating | class rating]] averages. This method is most prevalent in [[Definition:Commercial insurance | commercial lines]] — particularly [[Definition:Workers' compensation insurance | workers' compensation]], [[Definition:General liability insurance | general liability]], and [[Definition:Group health insurance | group health]] coverage — where individual accounts generate enough [[Definition:Claim | claims]] data to be statistically meaningful.

🔄 In practice, experience rating works by blending an account's actual loss record with the expected losses for its [[Definition:Classification code | class]], weighted according to the account's size and [[Definition:Credibility | statistical credibility]]. Larger accounts carry more weight on their own experience because their data is more predictive, while smaller accounts lean more heavily on class averages. The result is an adjusted rate — or a modification factor such as the [[Definition:Experience modification rate (EMR) | experience modification rate]] — that [[Definition:Underwriter | underwriters]] apply to the base [[Definition:Manual rate | manual rate]]. Some programs go further with [[Definition:Retrospective rating | retrospective rating]], where premiums are recalculated after the policy period ends based on actual losses incurred, effectively making the policyholder a partial self-funder of its own risk.

💡 Experience-rated programs create a direct financial incentive for policyholders to invest in [[Definition:Risk management | risk management]] and [[Definition:Loss control | loss control]], because every prevented or mitigated claim feeds back into lower future costs. This alignment of interests benefits [[Definition:Insurance carrier | carriers]] as well, since accounts that actively manage risk tend to produce more stable and profitable [[Definition:Loss ratio (L/R) | loss ratios]] over time. For brokers and [[Definition:Managing general agent (MGA) | MGAs]], understanding the mechanics of experience rating is essential when advising clients — a well-timed safety initiative or a strategic approach to [[Definition:Claims management | claims management]] can meaningfully shift a client's rating trajectory.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Experience modification rate (EMR)]]
* [[Definition:Retrospective rating]]
* [[Definition:Classification rating]]
* [[Definition:Credibility]]
* [[Definition:Manual rate]]
* [[Definition:Loss control]]
{{Div col end}}

Definition:Experience-rated - Revision history

PlumBot: Bot: Creating new article from JSON