Why Did Our Classification Codes Change So Abruptly?
Why did the classification codes change on my Work Comp policy? I received this Class Code question last week. With NCCI changing so many classification codes, I thought this would be a good area to cover this week.
Since 2006 the NCCI and State Rating Bureaus have changed many classification codes by either combining codes or creating new ones. If your class codes change due at renewal or at the yearly premium audit, this may not be a negative occurrence for your company.
The new class codes may actually reduce your premiums. It is not necessarily a negative change. One of the most common mistakes I see is when the employer decides that there is a better classification code that fits their business even though the code they wish to have is actually more expensive. This can happen even if the codes look less expensive.
How can this happen? There are other variables that are associated with each class code that may have the wrong effect on your Workers Comp premiums. You have to be very careful before disputing a class code change or if you think your current codes are incorrect.
Another classification code may look tempting as it is much less expensive. However, a class code that is associated with less risk can actually dramatically increase your E-mod (X-Mod). The workers comp savings that are due to a classification code switch may be wiped out and possibly even cause your company to pay more premiums. Some of the calculations and considerations can be very complicated.
If you feel your classification code does not necessarily fit your business and there is a better one that describes your business, it may be good to consult an expert on workers compensation premiums.
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