Experience rating is a procedure utilizing past developed experience of a risk to forecast or predict future experience. It is a mathematical method of modifying future premiums by comparing the actual incurred loss experience of a risk to the average expected loss experience for that risk’s classification(s) during the experience period. Under experience rating, risk’s maintaining favorable loss levels in prior years receive premium reductions (credit modifications) while those with poor past loss experience are charged increased premiums (debit modifications). Experience rating is a mandatory plan applying to all risks that qualify.
Information regarding the Experience Rating Plan and its provisions can be found in Section 5 (Experience Rating Plan) of the Pennsylvania Basic Manual.