In the context of experience risk modification factors, what number signifies a relatively high surcharge on rates?

In the context of experience modification factors used in workers’ compensation insurance, a number greater than 1.0 indicates that the employer's claim history is worse than that of others in the same industry, resulting in a surcharge on their premiums.

Choosing a modification factor of 1.25 signifies a 25% surcharge on top of the base rates. This reflects a level of risk that suggests the employer has had a higher incidence of claims compared to their peers, leading insurance carriers to increase the premium to account for the perceived greater risk involved in insuring that employer.

A factor of 1.30, while also indicative of a high surcharge, is not the selection here. The focus is on being relatively high, and at 1.25, the adjustment already communicates a significant concern but within a narrower margin compared to options higher than it.

Therefore, 1.25 appropriately represents a significant concern in terms of risk, sufficient to justify the increased cost of insurance, focusing on how claims history directly impacts premium adjustments in workers' compensation.