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Glossary

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Earned Premium

The portion of a premium that has been earned by the insurer for policy coverage already provided. For example, one half of the total premium will typically be earned six months into an annual policy term.

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Effective Date

The date when policy coverage begins, or the date when an experience modification takes effect.

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Employee

Every person in the service of an employer for whom the employer is obligated to provide workers' compensation benefits.

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Employers' Liability Insurance

Provides coverage against the common law liability of an employer for injuries to employees, as distinguished from the liability imposed by the workers' compensation laws.

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Endorsement

A form used to amend the provisions of an insurance policy.

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Entity

The legal nature of the insured's business; can refer to an individual (sole proprietor), joint venture, partnership, limited liability partnership, corporation, limited liability company, unincorporated association, or fiduciary operation (i.e., trust, receivership, or estate of a deceased individual). An entity may own several and distinct businesses.

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Excess Insurance

Insurance that covers the policyholder only for the portion of losses that exceed a certain dollar limit.

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Expected Loss Rate (ELR)

The average rate at which losses for a classification are estimated to occur during an experience rating period; they are generally expressed as a ratio per $100 of payroll. Expected loss rates, which are contained in the California Workers' Compensation Experience Rating Plan - 1995, are approved annually by the Insurance Commissioner. 

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Experience

Experience refer to the payroll and loss information for an entity or risk. It can be defined in terms of policy year, calendar year, accident year, report year, etc.

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Experience Modification

An adjustment to an employer's premium based on comparing the employer's experience to the experience of its industry. Generally, an experience modification of less than 100% reflects better-than-average experience, while an experience modification of more than 100% reflects worse-than-average experience. Accordingly, an experience modification that is greater than 100% usually increases the cost of the employer's workers' compensation insurance premiums, while an experience modification that is less than 100% usually decreases the cost of the employer's workers' compensation insurance premiums. The experience modification formula can be found in the California Workers' Compensation Experience Rating Plan - 1995.

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Experience Rating

California's workers' compensation experience rating system is a merit rating system intended to provide employers a direct financial incentive to reduce work-related accidents. The experience rating system objectively distributes the cost of workers' compensation insurance more equitably among employers assigned to particular industry classifications by deriving an experience modification for each eligible employer based on the experience rating formula in the California Workers' Compensation Experience Rating Plan - 1995  (Experience Rating Plan).  The eligibility threshold for experience rating for each year is specified in that year's Experience Rating Plan. Experience rating is applicable only to and mandatory for eligible employers.

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Experience Rating Form

Refers to the experience rating form used by the WCIRB to calculate an employer's experience modification. Also called Experience Rating Worksheet.

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Experience Rating Plan (ERP)

California Workers' Compensation Experience Rating Plan - 1995; contains the rules for experience rating an entity. The Experience Rating Plan is part of the California Insurance Commissioner's regulations for workers' compensation insurance.

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Expiration Date

The date on which a policy ceases to provide coverage.

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Exposure

Refers to the basis upon which premium will be determined - typically payroll or number of employees.