Experience

What Does Experience Mean?

In the context of insurance, experience refers to the history or record of losses incurred by an agent, policyholder, or other entity. It can also refer to the statistical data derived from the ratio of losses experienced by the policyholder to the premiums paid on their insurance policy.

Insuranceopedia Explains Experience

An insurance company monitors the experience, or the losses incurred by a policyholder, to assess the potential risks and future claims the policyholder may make. Using experience rating, the insurer adjusts the premium to more accurately reflect the level of risk the policyholder presents. If the policyholder’s experience is deemed to pose a higher risk compared to similar policyholders, the insurance company may increase the premium to ensure that claims or losses do not exceed the premiums collected.