Understanding Your Experience Rating Worksheet

In Many States, Worksheets Are Issued by the NCCI

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If your company is subject to experience rating under your workers' compensation insurance, an experience modifier should appear on your policy. Your insurance company should provide you with an experience rating worksheet that shows how it determined this modifier.

Key Takeaways

  • An experience rating is used to determine which employers get credit and which ones need to pay more when it comes to workers' compensation insurance.
  • When a company gets an experience rating, it should come with an experience modifier.
  • The experience modifier is a numeric factor that is multiplied by the annual premium to either raise or lower it.
  • Your insurance company should supply you with an experience rating worksheet so you can see exactly how your experience modifier was determined.

Your Experience Rating Worksheet and Modifier Are Issued by a Rating Authority

Experience modifiers are calculated by a workers' compensation rating organization. A modifier that's less than 1.0 will reduce your annual premium while a modifier greater than 1.0 will increase your premium.

If your business operates in one of the NCCI states, your modifier should be calculated by the NCCI. If your business operates in a monopolistic or independent state, your modifier is likely calculated by your state's workers' compensation rating bureau. No matter what organization issues your modifier, it should provide a worksheet that shows how the number was calculated.


Worksheets used in non-NCCI states may differ somewhat from the NCCI's worksheet, but they typically contain the same information.

Experience Rating Worksheet: Summary and Experience Period

Account Summary Section

The first portion of the worksheet, the account summary, includes the following:

  • Risk name: Your company name
  • Risk identification number: A nine-digit number assigned to your company by the NCCI
  • Rating effective date: The date your modifier takes effect
  • Production date: The date your modifier was calculated
  • State: The state in which you operate if you do business in one state only. It will show "interstate" if you operate in multiple states

Experience Period

Your experience modifier is based on three years of payroll and loss data provided by your insurer. The main portion of the worksheet is divided vertically into three sections, one for each year included in the experience rating period. Each section summarizes the premium and loss information for the year indicated. The oldest information appears at the top.

For instance, suppose your 2022 modifier was calculated based on data from January 1, 2018, to January 1, 2021. The data for the period January 1, 2018, to January 1, 2019, is shown at the top. It is followed by data for the following year (2019 to 2020). Data for the most recent year (2020 to 2021) appears at the bottom.

The worksheet lists the policy number and effective dates for each policy period. It also shows the five-digit carrier code, a number assigned by the NCCI that identifies the insurer that issued the policy.

Class Codes, Payroll, and Expected Losses

The worksheet is arranged so that classification codes, payroll, and expected loss data appear on the left while claim information appears on the right. The following table shows the types of information included in the first six columns. The first column (Code) indicates the classification codes assigned to your business. In this example, there are two class codes, 8810 (Clerical Office Workers) and 8742 (Outside Salespersons).

The second column lists the Expected Loss Rate (ELR). The ELR is an actuarial calculation using premium and loss data for all employers in your industry group. It represents the dollar amount your insurer is likely to spend on losses for every $100 of payroll.

For example, if the ELR is .20, your insurer can expect to spend 20 cents on losses for every $100 of your payroll.

Codes, Payroll, and Expected Losses
Code ELR D-Ratio Payroll Expected Losses
Expected Primary Losses
8810 .10 .38 3,750,000 3,750 1,425
8742 .25 .32 1,925,000 4,812.5 1,540

Your expected losses are calculated by dividing your payroll by 100 and then multiplying it by the ELR. In the above example, expected losses for code 8810 are calculated as follows:

.10 x (3,750,000 / 100) = 3,750

Here's the calculation for code 8742:

.25 x (1,925,000 / 100) = 4,812.50

Primary vs. Excess Losses

Suppose your business is hit with a huge loss after it has been loss-free for many years. One large claim could severely impact your experience modifier. To prevent that from happening, losses are divided into two parts: primary losses and excess losses.

Most states have established a threshold (such as $17,000) that separates primary losses from excess losses. Any loss amount up to the specified threshold is the primary loss while the remaining loss is the excess loss. For many claims, all of the primary loss is included for experience rating but only a portion of the excess loss is used.

The NCCI uses an actuarial factor called the Discount Ratio (D-Ratio) to determine the primary portion of your expected losses. It calculates your primary expected losses by multiplying your expected losses times the discount rate. Your excess expected losses are determined by subtracting your primary expected losses from your total expected losses.

Here are the calculations of expected primary losses for the two class codes shown above:

Code 8842: 3,750 x .38 = 1,425

Code 8742: 4,812.50 x .32 = 1,540


Your experience modifier is calculated by comparing your actual losses to your expected losses.

Claims and Actual Incurred Losses

The last five columns of the worksheet reflect your claims and actual incurred losses, meaning losses you have actually sustained. Here's an example:

Claims and Loss Data
Claims Data I J O F Actual Incurred Losses Actual Primary Losses
123456 05 F 20,000 17,000
654321 05 O 12,000 12,000
NO.6 06 F 13,000 13,000

Claim Data

Claims are listed under the heading Claims Data. In the above example, the first two claims are listed by their claim number but the third shows NO.6. The letters NO indicate a group of small claims that have been combined while the number shows how many claims have been included. "NO.6" means that six small claims have been lumped together. Small claims (typically those under $2,000) are combined only if they involve the same type of injury.

Injury Code and Status

To the right of the Claims Data is a column with the heading IJ, meaning injury code. This code designates the type of claim. For instance, "5" indicates a medical-only claim while "6" means a temporary disability claim. Next is a column with the heading OF. The letters "O" and "F" designate the claim status. "O" means the claim is still open while "F" means it is final (closed).

The table shown above contains data for eight claims: a group of six medical-only claims and two temporary disability claims. For the purposes of this example, the threshold for primary losses is assumed to be $17,000.

Actual Incurred Losses

The last two columns contain data applicable to your incurred losses. These are the workers' compensation benefits (medical expenses and disability payments) your insurer has paid to injured workers on your behalf. For claims that remain open, the loss amount may include a reserve (money your insurer has set aside for future payments).

Actual incurred losses means the amount that has been paid for the claim (or group of claims) indicated. Actual primary losses represents that portion of your total losses that's considered primary losses. When actual primary losses are subtracted from actual incurred losses, the result is actual excess losses. Only a portion of excess losses is used for experience rating.

Experience Rating Adjustment

In many states, medical-only claims are subject to an experience rating adjustment (ERA). When the ERA applies, only 30% of the claim amount is used for experience rating. The remaining 70% is ignored. The ERA does not apply to claims that result in disability payments.

Experience Rating Formula

The last part of the worksheet shows the experience rating formula and the values used to calculate your modifier.

Rating Factors

The formula includes two actuarial factors:

  • Weight factor: The weight factor determines how much of your actual excess losses are used to calculate your modifier. The factor is small if your firm is small and increases as your company grows.
  • Ballast: The ballast has a stabilizing effect. Its intent is to keep your modifier from deviating too far (up or down) from unity (1.0).


Your experience modifier is calculated by dividing your actual losses by your expected losses. Before that calculation is made, your actual losses and your expected losses are adjusted.

First, your actual losses are determined by calculating the sum of the following three items:

  1. Your actual primary losses: If the ERA applies in your state, then only 30% of your medical-only claims will be included in the formula.
  2. Stabilizing value: This value is determined by multiplying your expected excess losses by (1 minus the weight factor) and then adding the ballast.
  3. Your ratable excess losses: This is the amount of actual excess losses that are used for experience rating. It is calculated by multiplying the weight factor by your actual excess losses.

Next, your expected losses are determined by calculating the sum of the following:

  1. Your expected primary losses: This number is provided by the rating organization.
  2. Stabilizing value. This value is calculated in the same manner as indicated above.
  3. Your ratable excess losses. This is the amount of expected excess losses used for experience rating. It is calculated by multiplying the weight factor by your expected excess losses.

Finally, your actual losses are divided by your expected losses. For example, suppose your actual losses (based on the formula) were $45,000 and expected losses were $50,000. Your experience modifier would be $45,000 / $50,000 or .90.

Frequently Asked Questions (FAQs)

What is an NCCI experience rating worksheet?

An NCCI experience rating worksheet is given to companies in NCCI states to show them how their experience modifiers were calculated. This information shows how a company's annual premium is either increased or decreased. The worksheet shows information like the last three years of payroll and loss data, expected losses, and more.

What is the NCCI?

The NCCI is the National Council on Compensation Insurance. The NCCI collects data and information to provide insurance rate and loss cost recommendations. States that use the NCCI as their licensed rating and statistical organization and plan administrator include Maine, Maryland, Florida, Kentucky, Louisiana, Missouri, Oklahoma, Texas, Nebraska, Colorado, Utah, Hawaii, and Montana.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. NCCI. "ABCs of Experience Rating."

  2. NCCI. "About Us."

  3. NCCI. "NCCI State Map."

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