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, thereby preserving its overall integrity.
One key component of the Program is conducting inspections of policyholders’ operations. These inspections help to determine whether the governing classification code or other classification code(s) identified on a workers compensation 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), 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 the data from the Program, the table below includes the top 10 governing codes reclassified between 2018 and 2020 and the top code to which each of these codes was reassigned.
In past articles, we have discussed several of the top reclassified codes and industries shown above including mercantile operations and building or property management operations by owner.
For this year’s article, we expanded our scope to include the top 10 reclassified codes. Our focus is on the 6th reclassified code, which applies to machine shops.
Current Classification Information
NCCI’s Basic Manual states the following regarding the possible assignment of Code 3632:
- Foundry operations to be separately rated. Code 3632 applies to the manufacture or repair of machines, as well as to general job machining that is not otherwise classified. Applies only to shop operations performed on the premises of the employer.
Code 3632 applies to automotive machine shops that do not work on vehicles, but on parts or engines that have been removed from the vehicle. This classification also applies to employers that manufacture projectile and shell casings or perform tool sharpening operations for industrial tools.
It must be emphasized that Code 3632 is a Not Otherwise Classified (NOC) code, as defined in the Basic Manual, and is applied to operations only when such operations are not specifically included in another classification.
Inspection Data
A review of the inspection data from 2018 to 2020 indicates that when Code 3632 was deleted as the governing code, 53% of businesses were reassigned to the following three national classifications:
Let’s look at some of the reasons why these operations are reclassified.
Reassignment to Code 3629—Machined Parts Mfg. NOC
In 2013, NCCI initiated a review of machine shops due to reclassifications from Code 3629 to Code 3632. The review found that emphasis was being placed on the tolerances in the machining process rather than on the finished product. With the use of computers, plasma cutters, and laser technology, employers can produce precision parts without needing additional machining. During the review, it was also determined that there was a need to emphasize that Code 3629 is for manufacturing single-piece parts for others and does not allow for assembly of a single-piece part into end-product components. NCCI revised the language for Code 3629, removing the reference to tolerances, defining assembly, and specifying that an employer that machines single-piece parts cannot perform assembly operations.
Reassignment to Code 3612—Pump Mfg.
Employers reassigned from Code 3632 to Code 3612 manufactured or assembled the following products:
- Subassemblies run by or using compressed air (pneumatic) or fluids under pressure (hydraulic)
- Hydraulic pumps
- Pressure washing machines
Reassignment to Code 3113—Tool Mfg.—Not Drop or Machine Forged NOC
Employers reassigned from Code 3632 to Code 3113 manufactured or assembled the following products:
- Drilling bits
- Cutting tools
- Machining tools, dies, fixtures, jigs, and gauges
The inspections identified that the operations described above were misclassified to Code 3632 which applies to machine shop operations that are not otherwise classified. Codes 3629, 3612, and Code 3113 were the proper classifications for these employers.
Circulars
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NCCI releases various educational circulars on classification topics to further communicate and provide guidance for properly classifying business operations. These circulars are available to affiliates on ncci.com. The item filing announcement circular provided below details changes related specifically to Codes 3629 and 3632:
CIF-2014-42—Countrywide–Announcement of Item B-1428–Revisions to Basic Manual Classifications and Appendix E–Classifications by Hazard Group–UPDATED
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
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 the 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 by NCCI’s Classification Inspection Program. The general code information provided includes examples of the reclassification areas that have been 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.
