A critical yet sometimes overlooked factor in determining a contractor’s insurance premium is his or her own loss experience. Particularly in the world of workers’ compensation insurance, premiums are greatly affected by the frequency and severity of losses. For the insurer to properly assign premiums versus potential risk, they look to compare the individual contractor’s loss experience to those performing similar types of work. Simply put, the Experience-Rating Modifier (ERM) is computed as a factor of the insured’s own loss experience that is used to modify the standard premium. Therefore, those with higher-than-average losses will pay more for their insurance than those with average or lower-than-average losses.