When a workers comp policy is first set up, an agent or broker asks a series of questions to try and determine the correct workers comp code to use on the policy. This code is a description of the type of operations being performed at any given business. There are somewhere around 700 workers comp class codes available for use depending on the state in which your business is located.
The application of these codes can be very confusing not only to employers but also to insurance professionals. With so many to choose from you'd think it would be easy to make a proper classification. Well, code application can be deceiving. Here's some information on a recent case I worked;
- A large company recently acquired a manufacturing plant in which they produce hoses and fittings for the automotive industry. The workers compensation insurer was left in place after the acquisition. I was contacted by the new plant manager who asked me to review their workers compensation codes. The existing insurer had this risk classed as "machine shop." After a close review it was determined the proper code for this risk would be "plumbing supplies manufacturing." Correcting the workers comp code for this risk resulted in a 10% savings in workers comp cost on a payroll of over $900,000.
Workers comp codes do make a big difference! So make sure your business is properly classified! It's the first step in saving money on your workers compensation cost.
Here's a link to a page all about workers comp codes: Workers Compensation Codes
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