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Workers Comp Class Codes – Quick Primer On Important Policy Term

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Workers Comp Class Codes Quick Primer

The Workers Comp Class Codes are also known as Class Codes, Work Comp Codes, Codes, etc. Today, let us start with the definition of the Class Codes.

Picture of Man workers comp Class Codes Self Audit
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As I mentioned in my last post, the errors that we find have a common theme to them, which are Classification Codes. In laypersons terms, Classification Codes are how a Workers Comp carrier and the NCCI or your state rating bureau views your business operation. For instance, a trucking company may have a Classification Code of 7228 – which are short-haul truckers.

There is a very important point that needs to be made now. Your Classification Codes are not the same as your SIC codes. Your Work Comp Class Codes should not be based on your SIC codes. Quite often very small employers start out by doing a self-audit on their payroll and job types. When they grow, the Class Codes that are used year after year may have been based on the owner’s self-audit and description of the company.

Agent With Man And Woman Workers Comp Class Codes Discussion
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This is not to say that the insured, NCCI, agent, or insurance carrier did anything wrong. Quite often, the Classification Codes are just copied from year to year by the agent. What if you change course in what your business is doing, or if the NCCI or your state rating bureau performs an in-person audit? I am not talking about the premium auditor that does a yearly payroll audit. Do your Classification Codes have quite a few NOC’s (Not Otherwise Classified)?

A great example is a firefighting company that we assisted that was classified as a water carrier. Why? They had Water in their name. As they were a small company, they were audited over the phone year after year. The firefighters now pay over 60% less in Workers’ Compensation premiums after we were able to convince the State Rating Bureau and their insurance carrier of the mistake. Who was to blame? This was just the natural Work Comp insurance process that went slightly awry.

The main area I wanted to cover here today, which should have been covered last Friday, is how to tell if your Classification Codes are wrong. This is a very tough one, but here are some observations that we had while reviewing Workers Comp policies:

  • You have NOC in your Classification Code
  • The Classification Code is not what you do in your business.
  • The NCCI or State Rating Bureau has never inspected your business
  • Sometimes the Class Codes can be wrong if you have just been inspected (Catch 22)
  • The NCCI, Insurance carrier or Insurance Company Payroll Auditor has abruptly changed your Classification Code
  • Along with the abrupt change, you receive a very large Workers Comp premium bill
  • You have two or more very distinct businesses that are being classified in one “umbrella” class code
  • Your competitors are being classified differently
  • The #1 way to know is that you or someone in your company has a gut feeling that your Class Code is wrong, or there is something that is wrong overall with your Workers Comp insurance policy – that is when we receive most of our calls and emails, and gut feelings are right about 80% – 90% of the time.
Picture Hand Pointing Web Workers Compensation Classification Codes Concept
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I will add to this list as time permits. Those are the ones that I can remember off the top of my head. I am on the road this week traveling to the West Virginia NCCI Conference.

West Virginia has come a long way from a monopolistic state for Workers Compensation to a fully open market. Brickstreet has been the interim monopolistic private carrier for the last two years and will be the carrier until July 1, 2008.

Brickstreet will be the carrier for some of the West Virginia state agencies until July 1, 2010. 

 
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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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