Experience Modification

Adjustment of premiums resulting from the use of experience ratings. Experience rating plans take the form of retrospective plans or prospective plans. Under retrospective plans, premiums are modified after the fact. That is, once the policy period ends, premiums are adjusted to reflect actual loss experience of an insured. In contrast, under prospective plans, an insured's past experience (usually for the immediate preceding three years) is used to determine the premium for the current year of coverage.