NCCI's 2015 Classification Inspection Program Update - Top Five Reclassified Codes

Posted Date: May 28, 2015
    
As part of its core services, NCCI conducts classification inspections in all NCCI states. This specific service is called the Classification Inspection Program. The overall intent of the Classification Inspection Program is to monitor for the accurate and consistent application of the classification system, thereby maintaining its overall integrity.

Based on an analysis of inspections completed between 2012 and the end of 2014 in all NCCI states (excluding Texas), NCCI has identified the five classification codes that are most commonly reclassified, as well as the classification codes into which the employers are typically moved. The term reclassification refers to governing class code changes reflected on an NCCI inspection report. According to Rule 1-B of NCCI's Basic Manual for Workers Compensation and Employers Liability Insurance (Basic Manual), the governing code is the classification at a specific job or location (other than a Standard Exception code) that produces the greatest amount of payroll.

Classification Codes Commonly Reclassified Reclassified to Classification Code
8810—Clerical Office Employees NOC
  • 8723—Insurance Companies—Including Clerical & Salespersons
  • 8855—Banks and Trust Companies—All Employees, Salespersons, Drivers, & Clerical
  • 8803—Auditor, Accountant, or Computer System Designer or Programmer—Traveling
  • 8018—Store—Wholesale—NOC
  • 9012—Building or Property Management—Property Managers and Leasing Agents & Clerical, Salespersons
8742—Salespersons or Collectors—Outside
  • 8723—Insurance Companies—Including Clerical & Salespersons
  • 8720—Inspection of Risks for Insurance or Valuation Purposes NOC
  • 8018—Store—Wholesale—NOC
  • 8810—Clerical Office Employees NOC
  • 8721—Real Estate Appraisal Company—Outside Employees
9015—Building or Property Management—All Other Employees
  • 8855—Banks and Trust Companies—All Employees, Salespersons, Drivers, & Clerical
  • 9012—Building or Property Management—Property Managers and Leasing Agents & Clerical, Salespersons
  • 8723—Insurance Companies—Including Clerical & Salespersons
  • 8810—Clerical Office Employees NOC
  • 9014—Janitorial Services by Contractors—No Window Cleaning Above Ground Level & Drivers
8601—Architectural or Engineering Firm—Including Salespersons & Drivers
  • 8602—Surveyors, Timber Cruisers, Oil or Gas Geologists or Scouts, & Drivers
  • 8603—Architectural or Engineering Firm—Clerical
  • 4511—Analytical Laboratories or Assaying—Including Laboratory, Outside Employees, Collectors of Samples, & Drivers
  • 3681—Television, Radio, Telephone, or Telecommunication Device Mfg. NOC
  • 8810—Clerical Office Employees NOC
5191—Office Machine Installation, Inspection, Adjustment, or Repair
  • 8018—Store—Wholesale—NOC
  • 3574—Computing, Recording, or Office Machine Mfg. NOC
  • 8810—Clerical Office Employees NOC
  • 8803—Auditor, Accountant, or Computer System Designer or Programmer—Traveling
  • 3681—Television, Radio, Telephone, or Telecommunication Device Mfg. NOC
  • 7605—Burglar and Fire Alarm Installation or Repair & Drivers

The top five codes are similar to last year's. Due to their constant presence at the top, NCCI did not exclude Standard Exception Codes 8810 and 8742 from the ranking this year, which pushed Codes 8017 and 4299 out of the top five. Reasons for the reclassification of Codes 8810, 8742, 9015, 8601, and 5191 are described below:

1. Code 8810—Clerical Office Employees NOC
Code 8810 is a Standard Exception that applies to clerical office employees provided that they are not otherwise classified in the Basic Manual. These employees are common to many businesses but cannot be assigned to Code 8810 if clerical is specifically included within the phraseology of a basic classification applicable to the employer. In general, payroll for Code 8810 cannot be split with any other classification code, unless permitted by state exception rules.

Operations classified to Code 8810 were most commonly reclassified to insurance companies, bank and trust companies, property management, sales, and traveling auditors, accountants, or computer programming companies. NCCI Filing B-1419—Revisions to Basic Manual Classifications and Appendix E—Classifications by Hazard Group (Item B-1419) established new classifications for industries traditionally classified to Code 8810. These include banks, insurance companies, and check-cashing establishments.

2. Code 8742—Salespersons or Collectors—Outside
Code 8742 applies to outside salespersons or collectors. Salespersons or collectors, as defined in NCCI's Basic Manual, are employees who perform such duties away from the employer's premises. Code 8742 is not available for employees who deliver merchandise or work in a store. Employees who deliver merchandise would be classified to the appropriate driver code. Furthermore, Code 8742 does not apply to the sales staff of a store assisting walk-in customers and/or cashiers. Such employees are classified to the appropriate store code.

As with the other Standard Exceptions, Code 8742 does not apply when the basic classification wording includes outside salespersons and/or collectors.

Consider the following key points when assigning Code 8742:          
  • The phraseology of the code for the business does not include salesperson and/or collectors
  • The employee's duties are strictly outside sales and/or collections
  • The employee does not deliver the merchandise or work in a store

Summary on Standard Exception Classifications

Codes 8810 and 8742 are still showing up in the data at a high frequency. If a business is best described by a Standard Exception, the reclassification of just one employee to a basic classification will change the governing code. To minimize the reclassification of Codes 8810 and 8742, consider implementing this methodology: Codes 8810 and 8742 should not be used as the starting point for classifying a business. The nature of the business should first be determined, and Codes 8810 and 8742 should be added only if no other code applies and if all clerical guidelines are met. If the phraseology of a code includes Clerical and/or Salespersons, then Codes 8810 and 8742 cannot be used.

In addition, Item B-1419 created new classifications for insurance companies (Code 8723) and banks (Code 8855). Both of these classifications were classified to Code 8810 prior to Item B-1419. Item B-1419 also moved certain operations, such as claim adjusters or special agents for insurance companies, out of Code 8742 and into Code 8720.

3. Code 9015—Building or Property Management—All Other Employees
Code 9015 applies to the care, custody, and maintenance of premises. It is most commonly reclassified to Code 8855—Banks and Trust Companies—All Employees, Salespersons, Drivers & Clerical. Item B-1419 established new Classification Code 8855. Code 8855 applies to financial institutions that receive, lend, exchange, and safeguard money. Occupations include bank managers, tellers, loan officers, security personnel, armed and unarmed attendants, armored car operations, ushers, door attendants, and maintenance personnel of these institutions.

In addition, Code 9015 is also commonly reclassified to Code 9012—Building or Property Management—Property Managers and Leasing Agents & Clerical, Salespersons. When assigning Code 9015 to an insured, you must consider whether there are clerical staff, sales staff, a property manager, and leasing agents. If such employees exist, then Code 9012 applies to the employees performing those operations. Keep in mind that the phraseology of Code 9012 also includes clerical and sales staff; therefore, the insured would not qualify for Code 8810 or 8742 in such instances. Additionally, gate guards, doormen, concierge, and front desk employees are appropriately assigned to Code 9015.

Item B-1419 also established new Classification Code 8723—Insurance Companies—Including Clerical & Salespersons, to which Code 9015 is commonly reclassified. Code 8723 applies to insurance companies and their employees including office workers; customer service representatives; actuaries; inside claims adjustors/examiners/auditors; underwriters; professional support staff, such as lawyers; computer programmers; and agents, brokers, and rating organizations. Basic Manual Rule 1-B-3 states that maintenance or repair of the insured's buildings or equipment by the insured's employees is considered a General Inclusion and would remain under the governing classification code of the business. Unless the business was classified to a Standard Exception code, which is how banks were previously classified, Code 9015 would have previously been assigned to janitors or maintenance employees of a bank.

4. Code 8601—Architectural or Engineering Firm—Including Salespersons & Drivers
Code 8601 is again a top five reclassified code largely due to the changes implemented as the result of the approval of NCCI Item B-1408—Revisions to Basic Manual Classifications and Rules. Item B-1408:  
  • Established Classification Code 8602—Surveyors, Timber Cruisers, Oil or Gas Geologists or Scouts, & Drivers. This code is available for those operations that are conducted as separate and distinct businesses and not in support of an insured's principal business.
  • Established two new phraseologies under Classification Code 8603: (1) Architectural or Engineering Firm—Clerical and (2) Drafting Company—Clerical. Clerical employees of architectural or engineering firms and drafting employees confined to an office setting are assigned to Code 8603 rather than to Code 8810.
  • Revised the phraseology of Code 4511 to make the distinction between independent medical testing labs and those labs that are part of a medical facility, hospital, or physician's office. Insureds that do research and development that may involve the manufacture of prototypes are assigned to Code 4511.
In addition, it appears that engineers working in support of their main business, such as manufacturing, are sometimes reclassified. Per NCCI's Basic Manual Rule 1-A-2, subject to certain exceptions, it is the business of the employer within a state that is classified, not separate employments, occupations, or operations within the business. Also, Code 8601 specifically states that it only applies to insureds operating in the architectural or engineering profession as a separate and distinct business and not in support of an entity's principal business.

Also, software development is classified to either Code 8810 or 8803 when performed at the employer's own location or at their client location(s), respectively. Occasionally, these types of employments or businesses are being misclassified to Code 8601.

5. Code 5191—Office Machine Installation, Inspection, Adjustment or Repair
Code 5191 includes the installation, inspection, adjustment, or repair of all types of office machines including, but not limited to, calculators, computers, and computer-related equipment (such as modems and printers), copy machines, fax machines, microfilm equipment, postage machines, and typewriters.

Code 5191 is commonly reclassified because the basics of NCCI's Basic Manual Rule 1-D have not been fully considered. Rule 1-D states: "The purpose of the classification procedure is to assign the one basic classification that best describes the business of the employer within a state. Subject to certain exceptions described in this rule, each classification includes all the various types of labor found in a business."

Once the concepts of Rule 1-D have been reviewed, there is still more to do. NCCI's Basic Manual Rule 1-D-3 must also be reviewed to determine if other classification codes apply.

To ensure that an insured is properly assigned to Code 5191, consider the following:
  • Determine what the principal store operations are, if applicable, and what type of installation, inspection, adjustment, or repair services are being provided. Another installation or repair classification may better describe the operations being performed.
  • If an insured performs installation, inspection, adjustment, or repair services, determine where such operations are taking place. To qualify for Code 5191, an insured must perform such operations away from its shop. If the insured performs repair work only in the shop, that work would be assigned to the appropriate shop code. However, if the insured performs work in the shop as well as at the client location(s), Code 5191 may apply. One of the most common errors has been in applying Code 5191 when installation or repair operations are not being performed at the client location(s).
In addition to this article, NCCI released various educational circulars on the top five reclassified codes and other classification-related information. The circulars further communicate the basis of the codes and how they are to be applied by providing scenarios of their application. They are:    
  • Circular FYI-CW-2015-06—Countrywide—Establishment or Elimination of National and State Special Classifications From 2010 Through 2014
  • Circular FYI-CW-2015-05—Countrywide—Classification of Architectural or Engineering Firm and Surveyors, Timber Cruisers, Oil or Gas Geologists or Scouts, & Drivers Operations
  • Circular FYI-CW-2015-01—Countrywide—Classifications for Building or Property Management and Time-Share Operations
The overall intent of these educational circulars is to increase industry knowledge resulting in the elimination of these codes from the top five reclassified code list.

Two filing circulars should also be reviewed:
  • Circular CIF-2009-69—Countrywide—Announcement of Item B-1419—Revisions to Basic Manual Classification and Appendix E—Classification by Hazard Group
  • Circular CIF-2008-09—Countrywide—Item B-1408—Revisions to Basic Manual Classifications and Rules
These circulars announced Items B-1419 and B-1408. It has been several years since the implementation of these filings. The current data indicates that many of the treatments implemented by these item filings are not being applied.

Summary

It is imperative that the appropriate classification code(s) be assigned to the policy prior to policy issuance or renewal. Part Two of NCCI's Basic Manual contains the classification rules, along with the filed and approved phraseology and notes for each available classification code. NCCI's Scopes® Manual, a supplement to the Basic Manual, is a guide to understanding and assigning workers compensation classifications. The use of these tools, as well as asking the appropriate questions regarding an insured's operation, should greatly reduce the number of reclassified codes.

We are sharing our aggregate findings with our customers to communicate to the industry the trends that we are seeing. To illustrate some examples of the challenging areas that we have identified, we have provided some general information on the codes involved. Without a specific inspection to reference, NCCI can only provide general information on the codes involved.