Misclassification Of A Workers Compensation Code

I have performed many hundreds of workers compensation audit and code reviews over the years and will offer up for your reading pleasure several of these real life examples in this blog and blogs to come.

We were recently asked to review the workers compensation insurance program for a large manufacturing operation. The plant manager of this operation had a feeling that the current insurance carrier was using the incorrect workers comp codes for the type of work performed at the plant. The operation at this particular plant involved assembly of hydraulic hoses with an end use in the heavy equipment industry.

Sometimes workers comp codes and classification of a risk are easy....sometimes they are not! In this case the current insurance carrier had been classifying this plant as metal goods manufacturing. The metal goods manufacturing code includes such individual operations as stamping, planing, grinding, boring and other metal working procedures. In fact this plant in the past had been set up and performed pressing and metal working operations, where the metal goods manufacturing code would be appropriate. The review of this operation generated what we call a classic change of operation without notification. The owners changed the plant operation from one of manufacturing to one of performing assembly operations of previously manufactured items, without informing their workers comp carrier.

As with the example mentioned in a previous blog we were able to reclassify this operation to one of plumbing supplies assembly, a code which addressed the business operation more accurately. This reclassification resulted in a premium savings to this business of over 30%!

While not all business owners may enjoy the same type of outcome from a workers compensation code review as this operation it is certainly worth your time and effort to have your codes checked. Remember, no insurance company will question your desire to have these codes reviewed and when an error is found they will make the corrections needed to your policy. After all, the insurance company also wants the information to be correct!

For more information on misclassification of workers comp codes go to: Workers Compensation Code Reviews

Thanks for your time and I hope this blog has been helpful!

Help with Workers Compensation Codes

Workers compensation codes, right or wrong, are one of the primary driving factors in the cost or workers compensation insurance.

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

Thanks!