Classification By Analogy
The term Classification by Analogy is one of those workers comp buzzwords that generates a large number of emails and call to us. The term is usually mentioned by a workers comp auditor or rating bureau.
One of the challenges of classification is when there is no direct classification for a business. Sometimes, no code fits.
California’s Rating Bureau – the WCIRB (Workers Compensation Insurance Rating Bureau) publishes many great explanations of workers comp terms as does the NCCI. The rating bureau has that covered with the classification by analogy moniker.
- Any business or operation specifically described by a classification shall be assigned to that classification.
- Any business or operation not described by a classification shall be assigned to the classification(s) most analogous from the standpoint of process and hazard.
The dictionary term for analogy is:
- a similarity between like features of two things, on which a comparison may be based
- similarity or comparability:
- Biology. an analogous relationship.
- the process by which words or phrases are created or re-formed according to existing patterns in the language, as when shoon wasre-formed as shoes
- a form resulting from such a process.
- Logic. a form of reasoning in which one thing is inferred to be similar to another thing in a certain respect, on the basis of the known similarity between the things in other respects.
The #5 definition may make ones head spin. That definition is important when it comes to Workers Comp ratings by analogy.
Here is a great example of the #5 definition above by the WCIRB –
For example, Classification 2501(1), Clothing Manufacturing, contemplates cutting and sewing of fabric to produce
clothing and is often assigned by analogy to employers that cut and sew fabric to produce other non-clothing items. For this reason, Classification 2501(1) is often the first classification that comes to mind for employers engaged in any cutting and sewing operations. However, classifications such as Classification 2576,Awning, Tarp or Canvas Goods Mfg., and Classification 2571, Pillow, Quilt, Comforter or Cushion Mfg., also include cutting and sewing operations and must be assigned to the operation rather than Classification 2501(1) if they more specifically describe the employer’s operations.
Article provided by James Moore, AIC, MBA, ChFC, ARM. All articles are original content. Check out the full website at www.cutcompcosts.com