Workers' Compensation Classifications
The fundamental concept that different jobs have different exposures to injury or illness led to the practice of classifying workers according to risk. The classifications are the starting point for determining how much in insurance premiums a company will pay for each type of job. Most job classifications are determined by the National Council on Compensation Insurance (NCCI). The NCCI's classification "bible," known as the Scopes Manual, is a highly specific description and rating of more than 700 types of jobs. The number of classifications has grown steadily as the workplace and the economy have evolved. Software programmers and computer-chip makers, for example, got their own classifications in 1992. The NCCI constantly reviews and changes its manual to identify those classifications that no longer seem viable and to create new classifications that may be needed.
To arrive at an initial estimated premium, each type of job is given a classification code and a premium rate expressed in cost per $100 of pay. For example, clerical workers (NCCI Job Code No. 8810) may be assessed 29 cents per $100 of pay, while a driver (Job Code No. 7380) may be rated at $7.61 per $100 of pay. (In the above examples, a secretary earning $20,000 would cost a company $58 a year in estimated premiums, while a driver earning $35,000 would cost $2,663.50.)
Oil field workers, miners, and roofers are among the highest-risk employees and thus have the highest premiums; office workers are among the lowest.
The initial estimated premium is then modified by the insurer or rating agency to account for the employer's safety record and several other factors. These calculations determine a company's "total estimated premium" for the coming year and are spelled out in the premium statement.
At the end of the policy year, an auditor for the underwriter examines thecompany's payroll to determine the final "audited premium," which is the amount the company ultimately pays.
The job-classification process typically begins when a company contacts aninsurance agent for general business coverage. The agent will inquire into the various job functions undertaken by the company and prepare an application. This application is sent to various company underwriters, who calculate an estimated annual premium. These quotes are then analyzed by the agent and presented to your company.
If a company disputes a job classification, the appeal process usually works its way through the agent to the underwriter, who generally will send an inspector to examine the office or facility. Further appeals can draw in a rating-bureau reviewer. If there is still disagreement, the final decision will rest with the NCCI. Although there may be a charge, a proper classification will be given.