What is meant by “tailoring the cost of workers compensation insurance?
Every business has been assigned to one or more classifications that place it in a group with other employers engaged in similar business operations. The “manual rate” for each classification is calculated based on the combined experience for that classification. The manual rate, or premium per unit of payroll, is simply the “average” cost for reflecting the “average” conditions of that group. The “average” cost includes the experience of both the more “risky” and less “risky” employers in that group, and does not recognize the individual employers success in controlling workplace hazards. Experience rating adjusts the “average” rate to reflect the safety of each employers business operations. The “average” rate is tailored through the credit or debit of the experience rating modification in proportion to how much better or worse a companys experience is than the average for an employers group.
