The experience mod formula and worker’s compensation is a well-designed actuarily, all assessment of the perception of risk. It’s just not great. As far as the timing of when we see the results. Hello, my name is Michael Stack and I’m the CEO of Amaxx. And today I want to talk about that concept of the experience rating period. What timeframe is involved in your experience mod number. So you’ve got a number on your experience, rating worksheet. How long is that? Look back, period, what period of experience. So what timeframe does the experience part of the experience mod formula actually mean, what are we referencing? And that’s what I want to cover in today’s video. And as I said, it’s a great actuarily assessment of the perception of an organization’s risk. But the problem is that it’s a delayed gratification. It’s a delayed grad gratification. If you’re doing really well and you’re improving things, or you’re doing really poorly, you’re not going to get hit with it for awhile.
And so if you think about this in terms of your credit scores, your credit rating, you know, you think about like a credit card, you buy a bunch of stuff, you know, you buy a bunch of leverage electronics or technology or phones, or you’re going out and you buy yourself a bunch of sports equipment or whatever it is that you’re into. You get the gratification right away that you get the thing, if you get the stuff. But then later on, you’re going to end up paying a lot more when that bill comes due. So the same idea tab here type of a here applies. So let’s say we’re here in period five. The look back period is 48 months, 48 months is the look back period from the time of where you are now to the experience part of the experience mod formula, but it does not include the most recent 12 months. So it does not include the most recent 12 months. It includes the 36 month period, okay.
Of the most recent of the furthest away 48 months. So this includes period, one, two and three doesn’t include the most recent 12 months. And then that’s where you are today. So when you think about your experience period, you think about the delayed gratification. You think about the work that you’re doing today. If you’re working to improve your program, you’re implementing communication systems, return to work systems, you’re leveraging your claims handling team to really have everyone working together toward a common goal. Now you’re saying, I want to see some results in my experience, but it’s going to take you a little while for you to see that, but the results are going to be great. Coming back on the backend here, you’re going to have a lot of improvements. And when you’re seeing a couple of years later, the problem here is if you’re doing things really poorly, it’s this good.
Then the same effect occurs. You’re like, well, it doesn’t matter. What do I do to manage work comp? Who cares about that? It’s just a cost of doing business. It’s no big deal, but then you’re going to get hit. Just like you’re getting hit with a credit card, with a massive interest, massive penalties. You’re going into paying a lot more down the road. It’s a tremendous formula as far as how to actuarily and mathematically represented organizations, perception of lifts. But if we don’t understand this timeframe, then we’re not going to really be able to buy into seeing our results. And when we’re going to see those results again, my name is Michael Stack and the CEO of Amaxx. And remember your work today in workers’ compensation can have a dramatic impact on your company’s bottom line, but it will have a dramatic impact on someone’s life. So it’d be great.
Author Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%. He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is the founder & lead trainer of Amaxx Workers’ Comp Training Center, which offers the Certified Master of Workers’ Compensation national designation.
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