One of the most important aspects of pricing work comp insurance revolves around the classification system, or class codes. Most states rely on the National Council on Compensation Insurance (NCCI) to develop and maintain workers’ comp codes, while a few states such as California and New York maintain their own classification system. NCCI class codes are published, or updated, annually in the NCCI Scopes Manual.
The fact is that class codes and interpretation of codes can vary significantly by state. Most states have special class codes that may only be applicable to employers in that state. Additionally, each state may have different rules that apply to class codes. For example, Missouri laws allow owners to automatically have 10% of their wages included for clerical (8810) or sales (8742) codes, regardless of what the business does. Most other states require 100% of wages to be placed in the predominant job classification.
Because workers compensation class codes and rules change each year it is important for employers to stay abreast of changes to avoid audit surprises. Just because an insurance agent tells you to use a particular classification code does not mean its the correct code. Agents who specialize in workers comp coverage may be better informed and educated. Owner have the right to contact NCCI and request guidance on class codes. They may also contest the classification codes used on their policy up to 3 years prior.
As an Agency, we have come across a fair amount of insureds being misclassified over the past few years. In some cases we have been able to reduce premium by 50% or more by simply reclassifying the job exposures with NCCI and communicating these changes with the appropriate insurance companies.
Employers are well advised to ask their agent for the scopes description of each of the class codes on their policy. Job descriptions should be compared to the scopes descriptions to ensure similarity. Finally, don’t be afraid to ask your agent about other classification codes that may be applicable to your business. After all- you’re the one paying the premium.
