Now that we know three out of the last four years of your data is used to calculate your experience rating, what exactly is the data used?
To keep it simple (and not to get too deep into the weeds) the data calculated compares your expected losses (losses that you are expected to lose) vs the losses you actually acquired.
In THEORY, if your 01/01/2021 experience rating (using 3 out of the last four years worth of data) calculates you are expected to lose $75,000
01/01/2020 data is not used
01/01/2019 data calculates you are to lose $25,000
01/01/2018 data calculates you are to lose $25,000
01/01/2017 data calculates you are to lose $25,000
For a total of $75,000, you are expected to lose on your 001/01/2021 policy period. IN THEORY!!!
In THEORY, if you are expected to have $75,000 worth of claims for the 01/01/2021 policy period and you actually do acquire $75,000 worth of claims, you would be average, in theory, you would be issued a 1.0 experience rating factor.
In THEORY, if you have fewer losses than what you are expected to have, your future experience rating should go down. If you have more, your future rating will go up.
Now keep in mind, this is in theory. If you actually have losses that match exactly what you are expected to lose, your experience rating will be issued as a debit!