Premium Calculations

Part V of a workers’ compensation policy describes calculation of the policy’s annual premium. All figures are subject to audit.

In determining an insured’s premium, the first subtotal is found by:

  • Assigning a special class rate to each job within the company according to how dangerous it is
  • Multiplying each rate by that class’s premium basis: most often the company’s total remuneration (payroll expenses) for that class
  • Dividing this figure by 100 to get the premium
  • Adding the premium for each job class together

This subtotal is then multiplied by the Experience Modification Factor, an example of an experience rating which adjusts the premium according to the employer’s claims history.

Finally, the premium is adjusted according to the size of the employer. Large companies are eligible for a special discount.