What type of data is required to calculate Experience Rating?

To calculate Experience Rating, the necessary data includes three years of payroll and loss information. The Experience Rating is a method used in workers' compensation insurance to adjust premiums based on the insured's previous loss experience relative to their industry. By analyzing this data over a three-year period, insurers can assess the risk associated with a specific business and adjust premiums accordingly.

Using three years allows for a more stable and reliable calculation, as it smooths out anomalies and short-term fluctuations that might occur in a single year of data. A shorter timeframe, such as one or two years, may not provide a true reflection of a company's experience, especially if there are significant variations in payroll or losses during those years. On the other hand, extending the requirement to four years might introduce older data that may no longer be relevant to a company's current operations and risk profile.