Workers' compensation insurers typically adjust the premium they charge employers to reflect the loss experience of the firm, a practice referred to as experience rating. The practice should enhance the financial incentives for firms to prevent injuries and illnesses. However, small firms whose premiums fall below a threshold are not experience-rated because the predictive value of their experience is viewed as too low. This paper examines what happens to injury and illness losses when small firms do become subject to experience rating. If their injury experience improves, more consideration might be given to lowering the threshold premium in order to subject more firms to experience rating.
This work was prepared for the California Commission on Health and Safety and Workers' Compensation and conducted by the RAND Center for Health and Safety in the Workplace.
This report is part of the RAND Corporation Working paper series. RAND working papers are intended to share researchers' latest findings and to solicit informal peer review. They have been approved for circulation by RAND but may not have been formally edited or peer reviewed.
This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited; linking directly to this product page is encouraged. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial purposes. For information on reprint and reuse permissions, please visit www.rand.org/pubs/permissions.
The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.