Your experience modification is calculated by comparing the actual losses to the expected losses.
Actual losses are the medical and indemnity claim costs resulting from a work-related injury, that an insurance company has paid or expects to pay in the future.
Expected losses represent a business's projected losses for the industry in which it operates.
In other words, given its classifications and payroll, its expected losses represent the statistical average losses that a business of a similar size in the same industry is expected to incur. The larger the business, in terms of payroll, the more losses that business is expected to incur.