As part of its core services, NCCI conducts classification inspections in all NCCI states through its Classification Inspection Program (Program). The intent of this Program is to monitor the accurate and consistent application of the classification system to maintain its overall integrity. One key component of the Program is to conduct inspections of a policyholder’s operations to determine whether the governing classification code or other classification code(s) identified on the policy reflect the current business operations.
Inspection Data
Based on an analysis using data obtained from the Program between 2020 and 2022, the table below shows the top 10 governing codes reclassified, and the top code to which NCCI reassigned each of these governing codes.
In this article, our primary focus will be on the top five reclassified codes and the reasons why NCCI is commonly reclassifying these codes.
Code 8810—Clerical Office Employees NOC and Code 8742—Salespersons or Collectors—Outside
Code 8810 and Code 8742 hold the top two spots in NCCI’s list of the top reclassified codes. More than 60% of the policies inspected with Code 8810 or Code 8742 as the governing classification resulted in a governing code change. Of these inspections that resulted in a governing code change, NCCI reclassified more than half of them to Code 8723—Insurance Companies—Including Clerical & Salespersons. The data also shows that most of the employers that were reclassified were insurance agencies. It should be noted that insurance companies include
- brokers
- carriers
- exclusive agents
- independent agents
- providers and
- ratemaking organizations.
Reassignment to Code 8723
One of the main reasons for the frequent reassignment of employers from Code 8810 or Code 8742 to Code 8723 is changes in the classification system. Specifically, Item B-1419–Revisions to Basic Manual Classifications and Appendix E–Classifications by Hazard Group established Code 8723 for insurance companies in 2012, and since then Code 8810 and Code 8742 have remained in our top reclassified codes year after year. Prior to the establishment of Code 8723 for insurance companies, Code 8810 and Code 8742 were typically assigned to these operations.
Code 8006—Store—Grocery—Retail
Code 8006 was most often reclassified to Code 8033—Store—Meat, Grocery and Provision—Combined—Retail NOC. The data shows that 37% of the policies that were inspected resulted in a governing code change from Code 8006 to Code 8033. While both codes apply to retail stores that sell grocery items, the key distinction between these two codes is in the handling of fresh meats.
Reassignment to Code 8033
NCCI reassigned employers from Code 8006 to Code 8033 because they handle or sell cured and fresh fish, meats, or poultry in addition to selling grocery items. Code 8006 does not apply to employers that handle fresh meats.
Code 0042—Landscape Gardening & Drivers
NCCI most commonly reclassified employers from Code 0042 to Code 9102—Lawn Maintenance—Commercial or Domestic & Drivers. Of the policies inspected that resulted in a governing code change from Code 0042, NCCI reclassified 73% of them to Code 9102.
This table highlights some of the significant differences between Code 0042 and Code 9102.
Reassignment to Code 9102
NCCI reassigned employers from Code 0042 to Code 9102 because the work they perform is better described as maintenance operations and not new landscape installations. We also see cases where both Code 0042 and Code 9102 are properly assigned to a policy, but the governing code changed from Code 0042 to Code 9102. This may occur because there are more employees assigned to Code 9102. Code 0042 and Code 9102 may be assigned to the same employer, provided that they maintain verifiable payroll records.
Code 3632—Machine Shop NOC
Code 3632 moved from number six in the top reclassified codes list in 2021 to number five in 2022. In 2022, Code 3632 was most frequently reclassified to Code 3612—Pump Mfg.
Reassignment to Code 3612
NCCI mostly reassigned employers from Code 3632 to Code 3612 because it better describes the products they manufacture or assemble. Code 3632 is a Not Otherwise Classified (NOC) code, and it is imperative to verify that another classification does not specifically describe an employer’s business before assigning an NOC code.
Underwriting Circulars
NCCI releases various underwriting circulars on classification and other topics related to rules or forms to communicate and provide guidance for properly classifying business operations. These circulars are available for affiliates on ncci.com.
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Class Look-Up Tool
NCCI’s
Class Look-Up tool allows users to look up classifications, statistical codes, and related filed and nonfiled content. Users can filter or refine results 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. This tool is free for use by authenticated users.
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.
NCCI is sharing its cumulative findings to provide information about emerging trends identified within its Classification Inspection Program. The general code information provided includes examples of reclassification areas that were identified. Without a specific inspection to reference, NCCI can only provide general information on the codes involved.
If you have any questions, 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.
