Experience factor compares a business’s claim costs to the average for their industry. A higher number means higher costs. New businesses begin with an experience factor of 1.0000 (representing 100% of the industry average).
After a while in business, the number adjusts based on their experience with claims. This affects insurance costs to the business when base rates are multiplied by the experience factor to determine a business’s actual rate, with a lower experience factor translating into lower rates.
