As part of its core services, NCCI continually conducts classification inspections in all NCCI states through its Classification Inspection Program. The intent of this program is to monitor the accurate and consistent application of the classification system, thereby maintaining its overall integrity.
One key component of the Classification Inspection Program is conducting physical inspections of policyholders’ operations. The inspections help to determine whether the governing classification code or other classification code(s) identified on each insurance policy reflects the current business operations.
The governing code, as defined in NCCI’s
Basic Manual for Workers Compensation and Employers Liability Insurance (Basic Manual) Rule 1-B-5, 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.
In previous years, NCCI published articles regarding the top reclassified codes based on an analysis of inspections completed within the previous three calendar years. For 2017, NCCI concentrated on a single highly reclassified code (9015—Building or Property Management—All Other Employees). In this year’s article, NCCI’s focus is once again on a single reclassified code based on analysis of inspections completed from 2016–2018.
This article is intended to detail the appropriate classification treatment for operations that warehouse goods for others, specifically Code 8292—Storage Warehouse NOC.
Code 8292—Current Classification Information
Warehousing and storage operations are classified based on the type of items stored and which party has equity in the items. Employees of mercantile, manufacturing, transportation, and wholesaling operations that manage the storage and distribution of their own goods are being incorrectly classified to Code 8292. These employees are included within the governing classification of the business and are not separately rated to warehouse classifications.
NCCI’s
Basic Manual contains rules, classifications, rates, and loss costs for each classification, and state-specific exceptions for writing workers compensation insurance. Subject to state exceptions, NCCI’s
Basic Manual includes the following filed note for Code 8292:
- Applies to general merchandise. Drivers to be separately rated to the appropriate trucking classification.
NCCI’s
Scopes® of Basic Manual Classifications (Scopes® Manual) offers comprehensive descriptions of class codes, cross-references, and state special classifications. It is an aid to understanding and assigning workers compensation insurance classifications. The wording in NCCI’s
Scopes® Manual for Code 8292 includes the following description:
- Code 8292 is applied to employers engaged in the warehousing or storage of general merchandise for other business concerns provided such operations are not otherwise classified in the
Basic Manual. Firms falling within the scope of this classification have no equity in the merchandise they store. For example, if an entity operates a chain of stores and maintains a central storage warehouse for distribution of goods owned to its various stores, then that warehouse is properly assigned to the applicable store classification, not Code 8292.
Inspection Data
The following is a representative list of businesses that were originally classified to Code 8292 and were reassigned to the proper governing classification after inspection.
NCCI’s inspection data shows Code 8292 was removed as the governing code 47% of the time. The data also shows that while not the governing classification, Code 8292 was removed 53% of the time. During this period, the majority of reclassifications were from Code 8292 to Code 8018—Store—Wholesale NOC. These changes were due to miscellaneous employees who were classified incorrectly to the warehouse code.
Note that Code 8292 is a Not Otherwise Classified (NOC) code. According to NCCI’s
Basic Manual Rule 1-C-2-g—NOC:
- NOC means Not Otherwise Classified. If the classification wording uses the term NOC, that classification applies only if no other classification more specifically describes the insured’s business.
When determining the proper classification for an insured, an NOC code should be the last choice for classification assignment. To reemphasize, warehousing and storage operations are classified based on the type of items stored and which party has equity in the items.
Circulars
NCCI releases informational circulars on classification topics to further communicate the proper classification treatment for operations that are or have the potential to be commonly reclassified.
Circular FYI-CW-2014-09—Countrywide—Not Otherwise Classified (NOC) Codes, released in 2014, relates specifically to the proper use of NOC codes and includes an example of the appropriate classification of warehousing operations.
In addition to this article, NCCI releases various educational circulars on the top reclassified codes and other classification-related information. The following circulars further communicate the basis of codes and how they are to be applied by providing scenarios of their application:
The overall intent of these educational circulars is to increase industry knowledge in order to eliminate these codes from the top reclassified code list.
New Product Information
NCCI has recently developed a new
Class Look-Up tool. This tool allows you to look up classification and statistical codes and related filed and approved content. Results are filtered or refined by selecting or deselecting specific code elements. In addition to search results, the tool also provides a code and phraseology snapshot that includes information about the specific code selected and five years of rate history.
Summary
It is imperative that the appropriate classification code(s) be assigned at the inception of a policy. Part Two of NCCI’s
Basic Manual contains the filed and approved phraseology and notes for each classification code. NCCI’s
Scopes® Manual, a supplement to NCCI’s
Basic Manual, is a guide to understanding and assigning classifications. For Virginia, NCCI’s
Scopes® Manual wording is filed and approved in that state. The use of these tools, as well as asking the appropriate questions regarding an employer’s operations, should greatly reduce the number of reclassified codes.
We are sharing our aggregate findings with our customers to communicate the trends we are seeing in NCCI’s Classification Inspection Program. We have provided some general information about the codes involved to illustrate some examples of the general reclassification areas we have 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.
