What causes a workers compensation code to be changed on a policy?

A great workers comp question I was recently asked by an insurance agent!

Workers compensation codes are dynamic not static. They are situational and can change based on several factors at work behind the scenes. To better understand this concept you need to know that a workers compensation code is representative of a specific work process or job. Think of a code as a subsection of a subsection of a section of a business work environment. They can be very specific in their description of the work process in which they apply.

Think details!

As an example lets take a quick look at codes that apply to machine shop operations. Machine shop NOC, not otherwise classified, is a broad range code that may be applied to operations that include metal castings, manufacturing gears, using metal bars and rods and flat metal to machine, finish, shape, bore, bend or form into a product or part. Another code that may apply is precision machined parts NOC. This code is much more specific, even though it’s a NOC code, and in its description you’ll find tolerance limitations as to the precision of finish of the machined product along with conditional use limitations and some state limitations. While both codes share some common features like machining of parts and products, it’s the details that decide whether one will apply over the other. And in this case the Machine Shop NOC code carries a much higher rate than precision machined parts.

In this example lets say the employer was originally properly classified as a precision shop. Then during the policy year took on some work that fell outside the parameters of the precision shop code. The business operations have now changed, they may no longer be able to use the lower rate precision shop code and the workers comp code is changed.

Will a business owner know the effect a change causes in his operation? Probably not!

Other reasons codes can change are:

  • Updated code descriptions are now being used;
  • Older codes are retired and replaced;
  • State specific adoption or change in codes;
  • Other changes in business operations;
  • And there are more…

So remember, codes are dynamic. They can change for several reasons. Work with your workers compensation insurance agent and keep in touch with them when you make any changes in your business operations or if you have questions as to how a change may effect your premium.

Hope this helps you out! Thanks!