NCCI's Classification Inspection Program - Top Reclassified Code in 2019

Posted Date: July 15, 2020
    
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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.

From 2017 to 2019, NCCI’s inspection program identified various convenience and grocery store businesses that required a governing code change. This article focuses on the classification treatment for these operations, and, specifically, those assigned to Code 8006.

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Current Classification Information

Grocery and convenience stores have evolved over the years. In addition to selling a variety of grocery items, these stores’ operations may include a self-service gas station; a fresh meat, poultry, or fish department, or food and beverage service. When classifying a grocery or convenience store, it is important not to assign a code solely on the outward appearance of its operations, but to closely examine specific criteria, such as the total sales of items shown below:

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NCCI’s Basic Manual (Part Two) includes the following filed and approved wording for Code 8006 that provides additional details for the appropriate classification treatment of grocery or convenience store operations.

  • Applies to each separate store location meeting all of the following conditions:

  • 1. Selling a variety of items such as, but not limited to, snack foods, cereal, processed packaged foods, canned or frozen foods, fruits, vegetables, dairy products, health or beauty products, canned or bottled beverages, tobacco, publications, videos, flowers, bakery products, candy, coffee, tea, ice, delicatessen foods, flour, condiments, toiletries, sundries, automobile accessories, money orders, check cashing service, and the service of food or beverages.

  • 2. No handling of fresh meats.

  • 3. Receipts from the service of food or beverages constitute less than 50% of total receipts and receipts from gasoline sales constitute less than 90% of total receipts (total receipts exclude receipts from sales of lottery tickets).

NCCI’s Scopes® of Basic Manual Classifications (Scopes® Manual) includes additional wording for Code 8006 that specifically addresses the classification treatment of grocery stores that sell meat:

  • Code 8006 cannot apply to stores that also have departments that sell fresh and cured meats and/or fish and/or poultry. Refer to Codes 8031 and 8033 for these operations.

Note: Some states may have exceptions to the national Basic Manual rules and classifications referenced in this article. Refer to the State Rule Exceptions and Special Classifications sections of NCCI’s Basic Manual to determine whether an exception exists.

Inspection Data

A review of the inspection data from 2017 to 2019 indicates that some businesses originally assigned to governing Code 8006 required a change to another code. The table below highlights the top three national classifications that replaced Code 8006 as the governing code:

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Let’s take a look at some of the reasons why these operations are reclassified.

Reassignment to Code 8033

Grocery or convenience stores were reassigned from Code 8006 to Code 8033 primarily because the operations include the handling, cutting, or packaging of fresh or cured meat, poultry, or fish. Code 8006 does not allow the handling of fresh meats.

Reassignment to Code 9083

Policyholders reassigned from Code 8006 to Code 9083 had combined food and beverage service and grocery operations (e.g., a coffee shop or delicatessen selling grocery items and providing over-the-counter or casual dining service with no wait staff). Code 8006 was not the appropriate classification for these businesses because the sales receipts for the food and beverage service exceeded 50% of the overall sales.

Reassignment to Code 8017

Inspections for businesses reassigned from Code 8006 to Code 8017 were mainly for retail stores that sold specialty items (e.g., a tobacco, e-cigarette, or health and wellness store). These businesses did not sell a variety of items that are typically sold at a convenience or grocery store—and did not qualify for Code 8006.

Other inspections indicate that policyholders of kiosk operations that sold prepackaged snacks, sandwiches, and beverages were also reclassified from Code 8006 to Code 8017.

Circulars

NCCI releases various educational circulars on classification topics to further communicate and provide guidance for properly classifying business operations. These circulars include the following:

Class Look-Up Tool

NCCI has developed and enhanced our Class Look-Up tool, which allows users to look up classification and statistical codes and related filed and nonfiled content. Results are filtered or refined by selecting or deselecting specific code elements. In addition to search results, the tool 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 beginning 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. Using NCCI’s Class Look-Up tool and manuals, in addition to asking the appropriate questions regarding a policyholder’s operations, can greatly reduce the number of reclassified codes.

We are sharing our cumulative findings to notify you about emerging trends determined by NCCI’s Classification Inspection Program. The general code information provided includes examples of the reclassification areas that we 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.