Statistical Proportions – Quick And Dirty Number Powerhouse

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Statistical Proportions – A Guide To the Quick and Dirty Estimator 

I use statistical proportions as a very fast way to make predictions when you have three numbers and need to calculate the fourth one.   My algebra teacher in Junior High School taught me how to apply them to many situations.   Statistical proportions – often referred to as just proportions – can be a lifesaver  if you need a number quickly.  

dogs head statistical proportions sketch
Wikimedia Commons License – Floriunux

 Below is an example of how it works:  

Current Workers Comp Policy = 136,000 in premiums 

The Experience Modification Factor is .92.   What would be the premium if the E-Mod moves to .99?   

Proportions have been referred to as cross-multiplication and here is why – 

.92/136,000   = .99/x

.92x = .99 * 136,000

x = 146,347  

Now, many variables go into an X-Mod or E-Mod.   At least you have a fast way to estimate a number for budgeting purposes, etc.  

Businessmen Calculating Statistical Proportions Working In Office
StockUnlimited

That was a very raw example for Workers Comp but it does work to a degree.   Many actuaries will argue with me that I cannot shortcut the full E-Mod calculation.  However, the numbers do come out as I have compared the prediction to the outcome that actually happened with the premium.  

The further you go away from .92, for instance 1.35, the more inaccuracy that may be built in, but not necessarily.   

No, I do not use this calculation to make predictions or comparisons all the time – however – it is not a bad way to figure any type of what if situaion when you know three numbers and need to predict the fourth.  

A great example is the dog’s head drawing  as to how statistical proportions work.   The webpage has many different ways to work with proportions. 

This may seem too simple, but when you only have a minute to calculate an unknown number for comparison, this is a powerhouse.   I have used them since the 8th grade – thank you Mr. Epperson.  

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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