As part of its core services, NCCI continually conducts classification inspections in all NCCI states through its Classification Inspection Program (Program). The intent of this Program is to maintain the accurate and consistent application of the classification system and preserve its overall integrity. One key component of the Program is conducting inspections of policyholders’ operations. These inspections help determine whether the governing classification code or other classification code(s) identified on a workers compensation insurance policy reflect the current business operations.
The governing code, as defined in NCCI’s
Basic Manual for Workers Compensation and Employers Liability Insurance (Basic Manual), is the basic classification at a specific job or location (other than a standard exception code) that produces the greatest amount of payroll. If a change to a policyholder’s governing class code occurs (as documented on an NCCI Inspection & Classification Report), then the governing code is considered reclassified.
Based on data from the Program, the table below includes the top 10 governing codes reclassified between 2019 and 2021 and the top codes to which each of these codes were reassigned. For this year’s article, NCCI is focusing on the top 10 reclassified codes that are associated with past item filings, mercantile codes, and Codes 0042, 9015, and 8868.
Top 10 Breakdown
Let’s breakdown the potential reasons why we are seeing some of the same codes being reclassified over the years.
Previous Item Filings
One of the main causes for some of these code reassignments is due to changes that have occurred in the classification code system outlined in the following item filing announcements:
- In 2009, Item B-1419 established Code 8723. Also included in this filing, but not included in the top 10 chart, is Code 8855 Banks and Trust Companies—All Employees, Salespersons, Drivers & Clerical. These new codes created a shift in how we classify insurance and banking-related operations. Previously, these operations were classified to clerical Code 8810, but the new codes include clerical in their phraseologies. These new codes also include Code 8742 for outside salespeople.
- In 2014, Item B-1428 revised Codes 3629 and 3632. These codes are applicable to machining operations.
- In 2016, Item B-1435 established Code 7225 applicable to towing operations in most states. Previously these operations were assigned to Code 7219.
Changes to the Classification Code System
These reoccurring codes that are commonly reclassified span over many years and began when changes were made in the item filings mentioned above. Changes in codes occur when NCCI performs extensive research on a particular industry using multiple data sources. In these cases, there was a need to add new codes and revise existing ones. Although these types of changes may create an impact, they are necessary to maintain a fair workers compensation system.
What Does NCCI Recommend?
NCCI recommends that carriers and agents be aware of these ongoing reclassifications and requests that industry partners inform all pertinent staff members accordingly. It is important that all existing and new policies recognize the changes expressed in these item filings and follow up by making necessary corrections to individual policies.
Mercantile Operations
Also included in the top 10 reclassified chart are mercantile Codes 8006, 8017, and 8018. NCCI’s
Basic Manual advises that if a store sells a variety of goods, each of which may be subject to a different classification, you must assign the store to the classification that best describes the merchandise that generates more than 50% of the gross receipts. In reviewing the inspection data, we see that the majority of these store operations are being correctly reassigned based on this
Basic Manual rule.
What Advice Does NCCI Have?
There are many store-related codes to choose from. NCCI advises carriers, agents, and industry partners to become familiar with the variety of mercantile codes that are available, and count on the Basic Manual as a reliable tool when determining the best code for a specific store operation. Some questions to ask when determining the proper classification code for a mercantile operation can include:
- What types of products are sold?
- This can help narrow down a specific code that applies to that product.
- What are the percentages of sales between the different products sold?
- In this case, the store will be assigned to the code that generates more than 50% of gross receipts.
- Is it a retail or wholesale operation?
- This is an important determination because the mercantile codes are divided between retail and wholesale codes.
What About Codes 0042, 9015, and 8868?
Rounding out our top 10 are Codes 0042, 9015, and 8868. These codes have also been frequently reclassified over the years. Let’s look at some of the most common things to do and not to do when determining the proper classification code or codes for these industries. Here’s what to consider when assigning these codes to an employer:
Code 0042
- Do assign Code 0042 when an employer is installing new landscaping.
- Do not assign Code 0042 when an employer is providing maintenance to existing landscaping.
When considering Code 0042 for an employer, Code 9102 should also be reviewed. Code 9102 is applicable to the maintenance of existing lawns.
Code 9015
- Do assign Code 9015 to employees of a building or property management company that provide care, custody, and maintenance of the facilities or premises.
- Do not assign Code 9015 to employees of a building or property management company that are
a) clerical staff, b) leasing agents, c) model home hosts, d) outside salespersons, or e) property managers.
When considering Code 9015 for an employer, Code 9012 should also be reviewed when classifying a property management company. Code 9012 is applicable to all other operations outside of the care, custody, or maintenance of a property.
Code 8868
- Do assign Code 8868 to professional and clerical employees of colleges or schools.
- Do assign Code 8868 to child care service employees who are employed by a traditional school.
- Do not assign Code 8868 to independently run child care centers.
When searching for a code for child care operations, Code 8869 should be considered. Code 8869 does not apply to traditional schools, but to child care services that operate for various periods of time and assume care, custody, and control of children.
Circulars
NCCI releases various circulars on classification topics to further communicate and provide guidance for properly classifying business operations. These circulars are available to affiliates on
ncci.com.
Content Requires Authentication
Class Look-Up Tool
NCCI’s
Class Look-Up tool allows users to look up classifications, statistical codes, and related filed and non-filed content. Results are filtered or refined by selecting or deselecting specific code elements. The tool also provides a code and phraseology snapshot that includes information about the specific code selected and five years of rate history.
Summary
Assigning the appropriate classification code at policy issuance is an important step in maintaining the integrity of the classification system. NCCI’s
Basic Manual contains the filed and approved phraseology and notes for each classification code. NCCI’s
Scopes® of Basic Manual Classifications, a supplement to NCCI’s
Basic Manual, is a guide to understanding and assigning classifications. Using NCCI’s
Class Look-Up tool and manuals, in addition to asking appropriate questions regarding an employer’s operations, can greatly reduce the number of reclassified codes.
We are sharing our cumulative findings to provide information about emerging trends identified within NCCI’s Classification Inspection Program. The general code information provided includes examples of reclassification areas identified. Without a specific inspection to reference, NCCI can only provide general information on the codes involved.
If you have any questions or would like to order a classification inspection, please contact our Customer Service Center at 800-NCCI-123 (800-622-4123) or email us at
customer_service@ncci.com. We’re here to assist you Monday–Friday, 8:00 a.m.–8:00 p.m. ET.
This article is provided solely as a reference tool to be used for informational purposes only. The information in this article shall not be construed or interpreted as providing legal or any other advice. Use of this article for any purpose other than as set forth herein is strictly prohibited.
