CFO Magazine report on the industry

SMP Consulting Group (Website) is thrilled to report that CFO Magazine (Website) published an article written by one of our employees regarding the cost breakdown of workers compensation insurance (Breaking the Code).

A number of CFO's have reached out to SMP for further information and thanking us for a "do it yourself" tutorial.

Calculating the premium cost for workers compensation is very complicated and the article guides a CFO through the process.

For more information please contact SMP Consulting Group

Whiteboard animation that explains workers compensation audits

SMP Consulting Group is pleased to announce the release of its whiteboard animation that explains the importance of workers compensation audits. "Not everyone knows the importance of a workers compensation audit or why middle market and large companies should consider the service" said Greg Walker, SMP Consulting Group's Chief Operation Office (Bio).  Insurance premiums for workers compensation continue to increase each year.  The data used to calculate the premium is complicated and prone to errors and mistakes. 

For further information please read our blogs or visit our website

Greg Walker

www.smpconsultinggroup.com

Workers Compensation - State of the Industry

The National Council on Compensation Insurance (www.NCCI.com) provides annual reports on the state of the industry.  The following are some interesting facts:

- The workers compensation insurance product line reported revenue of $37.0 billion for 2013.

- The combined ratio for 2013 was 1.01%

- That combined ratio calculates a $370.0 million loss (1% of revenue) for the industry.

What is the combined ratio?

The combined ratio measure the profitability of the line.  It general it combines the losses incurred from claims plus the expenses for running the program.  It does not include the gains from investing the premiums so actual losses are a bit lower.  Unfortunately we have all experienced yield compression during the last two years.  It's hard to make a return on our savings.

 - In 2001 the combined ratio was 122.0%......wow!

That's a record loss year for the industry!

- During the last 35 years the industry has only had a combined ratio less the 100% four times.  Only twice in the last decade.  It has been hard to make money.

With investment returns at historical lows the industry is searching for ways to contain cost.  Claims management will continue to be the focus.

Workers Compensation rates continuing to increase in 2014, but at a slower pace than 2013.

Workers compensation rates are continuing to increase this year, but at a slower rate than 2013, according to an analysis released this week by Moody’s Investors Service Inc.

Rate firming is expected to slow to 5.5% this year, down from 8% in 2013, Moody’s said in Monday’s report. Still, this year’s rate increases are expected to remain “sufficiently above loss-ratio inflation” of about 2%, allowing an underwriting profit for 2014.

“However, our rate surveys suggest a reversal in risk appetite for WC in 2014, with carriers seeking to retain profitable accounts and competing for new business, which will dampen the pace of rate increases,” the report reads.

Moody’s expects that workers comp insurers will have a combined ratio of 98% in 2014 and 96% in 2015 if current industry trends continue, including rate increases and a reduction in taking on unprofitable accounts. That’s compared with a combined ratio of 103% in 2013.

Reserves for workers comp insurers “appear about break-even to modestly deficient for the industry,” Moody’s said. The use of predictive modeling in workers comp could lead to more stable loss reserve estimates in the future as the comp industry accepts such technology on a wider scale, according to the analysis.

Big Data and Insurance Carriers

A recent article in PEO Compass (www.http://peocompass.com), authored by Rick Kirsch, discussed the use of Big Data by insurance carriers as being a potentially disruptive technology.   Big Data is the buzz word for accumulating large pools of data and having the ability to manage, coordinate and analyze the various pieces.  A well defined Big Data strategy allows carriers to better analyze risk (losses and potential losses) and price that risk accordingly.    Since premiums (price) is a function of risk a better informed carrier can reduce price when the market perception of risk is overstated and capture market shar
e.  Conversely, when risk is greater then the market perception a carrier may require higher premiums or limit its new business underwriting therefore limiting its losses.  Big Data is a powerful tool.

Although SMP views the use of Big Data analytics by insurance carriers as a positive contribution to the overall health of the industry SMP recognizes that the proper data inputs are mandatory to the proper data outputs.

SMP Consulting Group specializes in Workers Compensation Audits and assuring the data inputs including classification codes and loss runs (an important input when calculating MOD) are accurate.

For further information please visit www.smpconsultinggroup.com

NCCI continues to support PEO's with its new designed webpage

Insurance Brokers should know that the< National Council on Compensation Insurance ("NCCI") revised its webpage on employee leasing providing relevant and concise information on the broader Professional Employer Organizations ("PEO").  In the past its employee leasing page was limited.   The name change from employee leasing to Professional Employer Organization provides a more focused approach.   "NCCI's webpage revision provides a practitioner with a one-stop resource for information and greatly expedites topic research and a place to find the proper forms" stated Greg Walker from SMP Consulting Group.

The site can be found at NCCI.

SMP Consulting Group provides premium recovery audit services for workers compensation, PEO's and subrogation claims.  For further information www.smpconsultinggrou.com.

Providing voluntary accident and disability reduces workers compensation claims

Lieberman Research Worldwide surveyed 600 small business for Aflac and concluded that companies who provide voluntary accident and disability insurance experience a reduction in workers compensation claims.  (Insurance Business).

One may conclude from the survey results that an employee will file a claim with  his/her accident and disability insurance provider rather then file a worker's compensation claim.

Why should employers pay attention?  

One of the variables for calculating the worker's compensation premium is the calculation of the experience modification.  The more claims a company submits the higher the "MOD rate".  The higher the MOD rate the higher the premiums.

Claims that are filed through the voluntary accident and disability insurance provider do not go into the MOD calculation.  The savings can be significant.

More importantly voluntary accident and disability insurance is generally paid by the employee.  Small and medium size businesses should encourage their workforce to sign-up.

SMP Consulting Group is the leading provider of workers compensation audits finding misclassifications and erroneous calculations for its clients.  We only work on a continent basis without upfront fees.  We only share in the savings.  For more information visit our website at www.smpconsultinggroup.com.

New York State Grand Jury focusses on Employee Classification Codes. Misclassifications are subject to severe penalties.

DA VANCE: GRAND JURY RECOMMENDS SIGNIFICANT CHANGES TO PREVENT WORKERS’ COMPENSATION INSURANCE FRAUD

 Manhattan District Attorney Cyrus R. Vance, Jr. today announced that a New York State Supreme Court Grand Jury has issued a report examining the vulnerability of New York’s workers’ compensation insurance system to fraud and misuse. The Grand Jury’s report stemmed from investigations by the District Attorney’s Money Laundering and Tax Crimes Unit into false information provided to the New York State Insurance Fund in connection with applications for, and audits of, workers’ compensation policies.

“Workers’ compensation insurance provides critical protection to both workers and their employers,” said District Attorney Vance. “The widespread premium fraud detailed by this Grand Jury Report is deeply troubling and underscores the critical need to reform the workers’ compensation system. My Office’s Tax Fraud and Money Laundering Unit will continue to pursue those who cheat the system, but the best protection for New York’s workers is a system that is itself protected from fraud and abuse.”

New York’s Workers’ Compensation Law dates back more than 100 years, and is closely associated with the tragic Triangle Shirtwaist Factory fire of March 25, 1911. The fire, which was the largest workplace tragedy of the time, killed 146 people when a fire broke out in a crowded Greenwich Village garment factory. With insufficient means of warning or escape, most of those who died were young immigrant workers. Those who survived had no workers’ compensation law to protect them, and while some recovered nominal payments through civil law suits against the factory’s owners, most were left with no way to recover medical expenses or lost wages.

Today, New York’s Workers’ Compensation Law provides a needed safety net for employees who are injured in the work place, while also protecting employers from law suits that could lead to economic ruin. Workers’ compensation insurance in New York is approximately a $6 billion per year business, with nearly 40 percent of the workers’ compensation market handled by the New York State Insurance Fund. 

The Manhattan District Attorney’s Office investigated incidents of insurance premium fraud that give wrongdoers an improper competitive advantage over law-abiding businesses, and deprived vulnerable workers of needed protections and benefits, while also costing New York State and City substantial revenue.  

New York law requires every employer obtain worker’s compensation insurance. An individual employer’s premium is based on each covered employee’s job classification, as determined by the New York Compensation Rating Board. A rate for a relatively safe job may be as low as two cents for each $100 of payroll, whereas the rate for a more inherently dangerous job could be as much as $35 for each $100 of payroll. This system, which requires employer self-reporting, is easily abused by unscrupulous employers who misclassify employees. Employers can easily lie about what work a particular employee performs, for example, reporting a roofer as a clerical worker, and thus paying a significantly lower premium. More egregious is fraud where an employer misclassifies a worker, who is required to be insured under the system, as an independent contractor, who is rather an employee. 

Taking into account a June 2013 report of the Fiscal Policy Institute and other estimates, New York City’s construction industry in 2011 cost the City and State approximately $500 million based on worker misclassifications. The largest component of the loss was unpaid workers’ compensation premiums, with personal income tax, withholding, unemployment insurance, and various other business taxes accounting for the remainder.

Premium fraud affords wrongdoers an improper competitive advantage over all law-abiding businesses, makes workers vulnerable by depriving them of important protections and benefits, and deprives New York State and New York City of substantial revenue. Every lost dollar must be made up by a dollar increase somewhere else, usually by a cost-shifting phenomenon that affects us all. Every law-abiding employer is a victim of this criminal conduct, as is every hard-working employee, every consumer, and every honest taxpayer.

Since 2013, the Manhattan District Attorney’s Money Laundering and Tax Crimes Unit recovered approximately $4.8 million from criminal defendants who pleaded guilty to defrauding New York State by violating the Workers’ Compensation Law. Overall, premium fraud generates an unfair business environment in which honest business owners cannot compete with rogue employers and are either forced out of the market or dissuaded from entering it in the first place. This Grand Jury was empaneled to make recommendations to stem the tide of abuse.

The recommendations proposed by the Grand Jury, designed to assist in early detection of premium fraud, improve compliance and enforcement efforts, deter cheating, and ensure fair and equitable treatment of all policyholders, fall into four general categories: 

• Increased Penalties to ensure that sentences are proportionate to the magnitude of the fraud. Under current law, a defendant faces no more than a class E felony whether the amount of the fraud is $1,000 or $100,000. The Grand Jury recommends:
  • Gradating the Workers’ Compensation Law and relevant criminal statutes based on monetary thresholds;
  • Amend relevant provisions of the Penal Law, such as the money-laundering statutes and the enterprise-corruption statute, to include Workers’ Compensation Law felonies as possible predicate felonies.
• Increased Transparency by overhauling the application process used by employers and the audit procedure of the policyholder.
  • Design a uniform workers’ compensation insurance application that will be submitted electronically to the Workers’ Compensation Board;
  • Require vigorous audits by all insurance carriers, ensuring that employers pay the correct premium; and
  • Issue every employee a Workers’ Compensation Insurance card for the employee to present when seeking medical services or prescription drugs in connection with a job-related injury or illness.
• Broader Data Collection and Collaboration to increase dissemination of information in the hands of those charged with investigating and prosecuting fraud.
  • Create an integrated database to combat workers’ compensation insurance fraud, including all application, audit reports, and certificates of insurance; and
  • Create a real-time database of information from commercial check cashers available to the Workers’ Compensation Board.
• Broader Education for employees and the community at large about the workers’ compensation system and its value to the public, so that everyone is better able to protect the system from fraud.  
  • Employers should know their obligations under the system;
  • Community recognition about the negative effects of premium fraud; and
  • Employees should be encouraged to invoke their rights under the system.

Assistant District Attorney Gilda Mariani, Chief of the Money Laundering and Tax Crimes Unit, presented the investigation to the Grand Jury, under the supervision of Executive Assistant District Attorney David Szuchman, Chief of the Investigation Division. Assistant District Attorney Amyjane Rettew, Appellate Counsel to the Investigation Division, and Eleanor Rettew, Paralegal in the Money Laundering and Tax Crimes Unit, assisted with the report.

District Attorney Vance thanked the following for their assistance in the investigation: New York City Mayor’s Office of Data Analytics, New York State Insurance Fund, New York State Department of Labor, and the New York City and State Departments of Taxation and Finance for their assistance in the investigation.

 SMP Consulting Group focusses on Workers Compensation Employee Classification Codes.  For more information www.smpconsultinggroup.com

Plastics Industry executives that pay attention to cost will pay attention their workers compensation premiums

Plastic Industry Executives that are mindful of cost will closely monitor their workers compensation premiums.  The cost savings can be significant for those that pay attention.

Workers Compensation premium are set according to your company's Employee Classification Codes.  The insurance underwrites use these codes to assign risk to the various jobs.

For example:

Employee Classification Code 4452 is applied to to the machining of plastic products developed from raw materials in the form of sheets, rods and tubes. It includes machining, bending buffing and polishing. This code also applies to vacuum forming of products where the plastic is heated and pulled into molds that form the product Heated plastic can also be applied to molds and the product would fall under this category.

Employee Classification code 4459 Applies to the manufacturing of plastic sheets,rods and tubes using the extrusion process. This involves the grinding and mixing of ingredients that produce pellets, granules or liquid dispersions that are processed into sheets, rods and tubes that are run through dies on machines under pressure to shape and produce the product.

There are also several other codes that your state may use in such as 4484, 4475, and 4476. Code 4484 is used in some state for compression and injection molding so you would have to check on your states special classes.

Why Employee Classification Codes matter?

If you have your employees in the wrong code your premium may be higher then it should.  The table below illustrates the difference.

                                  4452                            4459
Connecticut              $10.22                         $ 5.65
Idaho                        $  4.71                         $ 3.59
Illinois                      $  7.87                         $ 7.81

Per $100 of payroll

If you have operations in Connecticut your difference is substantial.   You can see from the above table that the difference in Illinois is marginal.   Depending on your state and your code the premiums you pay will vary.

What should you do?  First, you should take a look at your payroll runs to see how employees are classified.  Use the definitional codes provided by your State's Worker Compensation Bureau.  The NCCI coordinates it for twenty-three states so you may start there.

Alternatively, you can hire a professional that specializes in Workers Compensation Audits.  The most reputable firms do not charge an upfront fee.  Typically they will go back three years and do it for fifty-percent of the savings.  Your portion of the savings are furnished to you directly and you enjoy the benefit of lower costs for the next several years.

This article was written by Greg Walker at SMP Consulting Group.  SMP's specializes in workers comp audits (www.smpconsultinggroup.com).  Gwalker@smpconsultinggroup.com

Incorrect Workers Compensation Employee Classification Codes in the Chemical Industry can be costly.

Workers Compensation insurance premium rates are highly dependent on Employee Classification Codes.  What are Employee Classification Codes?  These are the four digit codes insurance companies use to set premiums for workers according to their job and the risks associated with their activity.

Two codes that impact premiums in the Chemical Industry are 4828 and 4829.  At first glance the definitions look similar so you may be indifferent as to the code you place your employee under.  That indifference could be an expensive mistake.

The National Council on Compensation Insurance ("NCCI") (www.ncci.com) defines 4828 and 4829 as the following:

4828 is applied to employees engaged in compounding, blending, mixing, bottling, and packaging chemicals.

4829 is applied to employees engaged in the manufacturer of products requiring a chemical conversion. A "chemical conversion" is the process whereby a substance undergoes a molecular change in composition.

Why the fuss?

The rates for 4828 and 4829 vary.

                                  4828                            4829
Iowa                          $2.36                           $1.69
Mississippi                $2.92                           $1.10
Florida                       $6.32                           $3.98

Rates are per $100.

If you have employees listed as 4828 when they should be 4829 you are overpaying your workers compensation insurance premiums.

Other common mistakes are with Employee Classification Codes are found in the following:

4511 - Analytical laboratories
4741 - Asphalt or Tar Distilling or Refining
1472 - Distillation - Wood
2132 - Distillery - Spiritous Liquor

Every code is priced differently.

What should you do?  First, you should take a look at your payroll runs to see how employees are classified.  Use the definitional codes provided by your State's Worker Compensation Bureau.  The NCCI coordinates it for twenty-three states so you may start there.

Alternatively, you can hire a professional that specializes in Workers Compensation Audits.  The most reputable firms do not charge an upfront fee.  Typically they will go back three years and do it for fifty-percent of the savings.  Your portion of the savings are furnished to you directly and you enjoy the benefit of lower costs for the next several years.

This article was written by Greg Walker at SMP Consulting Group.  SMP's specializes in workers comp audits (www.smpconsultinggroup.com).  Gwalker@smpconsultinggroup.com

SMP Consulting Group announces new hires!

SMP Consulting Group is pleased to announce the hiring of Mark Serri and Pat Monahan to it's Working Partners acquisition team.  Mark and Pat will report directly to Brian Kelly, Chief Marketing Officer and Executive Vice President.  "the hiring of Mark and Pat continues SMP's tradition of
hiring talented and thoughtful professionals to help SMP maintain its Best in Class Working Partner relationships" stated Brian Kelly.

SMP Consulting Group is also pleased to announce the hiring of Todd Spencer and William Utley to our middle market company acquisition team.  Todd and William introduce SMP's worker compensation audit service directly to middle market companies though-out the United States.  Ed Kelly, President and CEO stated "We are excited to announce the hiring of Todd and William to our team.  Todd and William provide a dedicated work ethic that compliments SMP's values and professionalism that our clients depend on".

Please join us in welcoming Mark, Pat, Todd and William!

By Greg Walker, SMP Consulting Group "the leaders in workers compensation audit".  For further information gwalker@smpconsultinggroup.com or follow us on Twitter @workcompaudit or
www.smpconsutlinggroup.com

Ed Kelly, President and CEO of SMP Consulting Group attends the AMCOMP conference.

The American Society of Workers Comp Professionals focusses on four principal objectives:

1. To maintain the integrity and degree of excellence in the field of workers compensation by providing a professional designation (upon fulfillment of various criteria, including successful completion of a core curriculum and/or qualifying work experience) that will serve as an industry standard; 2. To further the education of all workers comp professionals by providing relevant courses in the workers compensation field of study and in related disciplines; 3. To maintain a current understanding of emerging trends and issues in the workplace and how they relate to the field of workers compensation by means of newsletters, annual meetings, monographs, conferences and/or relevant seminars; and 4. To further ethical standards in the field of workers compensation by establishing uniform guidelines and principles. AMCOMP is best know for its education certification program - Workers Compensation Professional ( WCP®)  Mr. Kelly provides leadership to AMCOMP through his Board of Directors role that he shares with many prominent industry leaders focused on worker compensation issues.  AMCOMP Board of Directors. SMP Consulting Group, the leader in workers compensation audits can be reached at www.smpconsultinggroup.com, @workercompaudit on Twitter or 631-647-9210 By Greg Walker (gwalker@smpconsultinggroup.com)

Headwind Capital Acquires Stake in SMP Consulting Group, The Leading Nationwide Workers Comp Audit Firm


SMP, Nation’s Premier Workers’ Compensation Audit Firm, with Network of Locally Based Partners in Specialty Coverage, to Expand and Enhance Services and Products
SMP Consulting Group, the country’s leading workers’ compensation premium auditing firm as well as a distributor of specialty insurance products through its nationwide network of partners, today announced a significant capital investment in its capabilities by Headwind Capital. The announcement was made jointly by Greg Walker, President and CEO of the privately held Headwind Capital, and Edward J. Kelly, Jr., President and CEO of SMP.

Through this new relationship, SMP (smpconsultinggroup.com) will continue to expand its signature workers’ compensation premium recovery services to mid-sized companies that may be overpaying premiums due to erroneous employee classifications, outdated rates or other factors.
Additionally, the capital investment will enhance SMP’s Working Partners Network – which provides opportunities to middle-market brokers across the country to expand their offerings in their marketplaces with highly specialized coverage in specific industries. These industries include trucking, construction, health care, education, restaurants and nightclubs, parking garages, and municipal services.

“Through this new alliance with Headwind, SMP is uniquely positioned to help our clients recoup premium overpayments and reduce their costs moving forward, and back that up with alternatives and innovative options from their local insurance broker,” said Kelly.
“I have watched with interest the changes in the insurance space for a number of years, and have provided capital to grow a number of companies in the industry,” stated Walker. “As the economy continues to strengthen, employers will be looking closely at their insurance costs, and Headwind sees this as an opportunity to provide a valued service through SMP.”
Walker said he is also excited about SMP’s growing national Working Partners Network, which is comprised of select regional brokers. “Prior to investing I spoke with a number of Working Partners who are thrilled with SMP’s products and service offerings, and Working Partners brokers will continue to experience impressive growth in their business through their affiliation with SMP,” he noted.

SMP Consulting Group markets premium recovery and other cost-containment services to companies across the nation resulting in the retrieval of substantial dollars in overpayments made to insurance carriers and employee leasing companies (PEO). Services are provided on an exclusive basis to members of SMP’s nationwide broker network known as the Working Partners Network.
Headwind Capital, LLC, founded in 2008, is a privately held investment boutique that advises and invests in middle market companies in emerging growth markets. To date, Headwind Capital and its principals have structured, negotiated and closed over $3.0 billion in financing in fifteen different industries and within ten different countries. 

Further information: gwalker@headwindcapital.com or Ekelly@smpconsultinggroup.com
Visit us on Twitter

@Workercompaudit

How Employee Classification Codes impact your Workers Compensation Premiums

How Employee Classification Codes impact your Workers Compensation Premiums

Double digit increases in workers compensation premiums in 2014 should provide you a good excuse to focus on your Employee Classification Codes.  As discussed on previous blogs the wrong code may cost you plenty.

Employee Classification Codes is a three or four digit code assigned by NCCI or a State's Workers Compensation Bureau.  Class codes help differentiate between the various job duties or "scope of work performed" by employees.  Each code is assigned to a specific function within an organization and denotes the risk the employee encounters each day.  An employee working with a machine is more at risk of getting hurt then an employee in the accounting department.  Therefore his assigned code requires a higher workers compensation premium.  

Example
A machine worker inside a sheet metal products company will have an employee classification code of 3066 at pay a rate of $3.93.

An employee working at the same company in the accounts payable area will have an employee classification code of 8810 at a pay rate of $0.20.  (note: both rates are loss cost rates).

If you have more then fifty employees its important you pay attention.  The rate differential is significant and costly if you have your employees coded incorrectly.

Unfortunately the Employee Classification Codes may be a bit more confusing.  A machine worker inside a sheet metal products company is not the same code as a machine worker inside a wood products company.  In fact there are over 700 employee classification codes in the system.  Each code requires a different payment.

The Employee Classification Codes are not complicated without reason.  Each code is assigned a risk classification and the dollar amount assigned to that code requires a contribution to the worker compensation fund.  Companies that employ people in riskier jobs contribute more dollars to the fund.  That is how the system works.

Companies can go to the NCCI.  The NCCI gathers data and analyzes industry trends.  Its a good place to find Employee Classification Codes.  You can also go to your State Workers Compensation Rating Bureau.  

Start with a check list of every employee and compare their codes.  You have the right to go back three years.

Professional firms are available to audit your Employee Classification Codes.  You should never pay an upfront fee.  A reputable firm will only charge you on a contingency basis, typically fifty-percent of the savings for the year they perform the audit and the recoveries they identify from the three prior years.  The reduction in rates for the subsequent years are yours to enjoy.

By Brian Kelly, SMP Consulting Group "the workers compensation audit specialist"
bkelly@smpconsultinggroup.com or our website smpconsultinggroup.com


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How Employee Classification code impact you workers comp premiums

Why its important to audit your workers compensation - Massachusetts increasing rates 7.7%

In December, 2013 Massachusetts Workers Compensation Rating and Inspection Bureau submitted a rate filing that effectively increases rates by 7.7%.

 https://www.wcribma.org/mass/Products/Circulars/2013_Circulars/cl2230.pdf

After almost three years of zero growth SMP Consulting Group continues to see these types of high single digits and double digit rate increases throughout the country.

Working on a contingency basis, SMP Consulting Group focusses on workman compensation audits for middle market companies.  We make sure the employee classification rates and MOD rates are accurate.  Our client list (found on our website) has saved hundreds of thousands of dollar during our thirty-five year history.

Workers Compensation Audits may save you thousands!

Are your Workers Compensation Premiums high and continue to increase each and every year?  Paying attention to classification codes and MOD rates may save you $100,000.

We all cringe each time we open an invoice and our insurance premium notices are no exception. 

Workers comp premiums are state regulated and may be confusing and complex.   Employee Classification Codes and Rate Modification designations are often hard to understand and the wrong code may be costing you a lot of money.

Here is an example:  A plastic injection molder with two hundred-employees may have many different classification codes.  In New York for example an employee in manufacturing may be classified as 4452 (plastic sheets, rods or tubes), 4475 (compression or injection), 4476 (assembly).   Why does it matter?  The workers comp loss rate for each classification code varies, example: 4452 ($7.45), 4475 ($7.21), and 4476 ($6.05) per $100 of payroll.   A sales person or clerical support person should have codes 8742 ($0.43) and 8810 ($0.20) respectively.   If the employee is misclassified, the rate differential is significant and you may be overpaying.

What should you do?

The National Council on Compensation Insurance (www.ncci.com) or your states rating bureau will be the place to find the proper classification.  The National Council on Compensation Insurance (NCCI) gathers data, analyzes industry trends, and prepares objective insurance rates and loss cost recommendations.   They provide the manuals that practitioners and large companies depend on.

Additionally, you can check with your states workers compensation rating board for further guidance and risk classification.

You should start with a general understanding of the classifications.  Codes pertaining to your company will be found on your current policy.  Pay attention to the rate change dates.  New ratings are generated from the state rating bureaus several times per year.

Once you understand the classifications, you can begin to audit the policy.  A spreadsheet with a list of employees and corresponding codes will be helpful.  Remember to look at the multiple sub-classifications.  All machine operators are not coded the same.  The rates may be significantly different.  A machinist on the floor of the factory full time is different from a machine operator working in an office.  Each code assigns a level of risk and higher risk codes are costly. 

Now that your worksheet is complete you should prepare a letter to the insurance carrier indicating the errors.  Most times carriers will make the adjustments resulting in lower premiums.  If they deny the changes and you still feel strongly, you can appeal to the state workers compensation rating bureau. 

Workers compensation insurance premiums may be one of the highest cost line items for a company.  Focusing on the classifications and experience modification rating may save a company a $100,000 in premium.   Compounding savings over a five-year period is significant.

Try it yourself or consult with a specialized audit practitioner.

This article was authored by Brian Kelly and Gary Sandford at SMP Consulting Group.  Please visit our website for further insights (www.smpconsultinggroup.com) or email me at bkelly@smpconsultinggroup.com.