Cost allocation is based on the experience rating of the industry in addition to being the fairest method(theoretically) of allocating costs this approach is also supposed to give employers an incentive to initiate safety programs Opinion vary as to the fairness and effectiveness of this approach Arguments against it include the following (1)small firms do not have a sufficient number of employees to produce a reliable and accurate picture of the experience rating (2)firms that are too small to produce an experience rating are rated by class of industry thereby negating the incentive figure (3) premium rates are morn directly sensitive to experience levels in larger firms but are less so in smaller companies and(4) in order hold down experience ratings employers may put their efforts into fighting claims rather than preventing accidents not much hard research has been conducted to determine the real effects of cost allocation Such research is badly needed to determine if the theoretical construct of workers compensation is in reality valid