When reviewing your workers’ compensation, we always review your class codes to make sure you’re in the appropriate codes.
Reviewing workers’ compensation class codes is part of how we quote workers’ comp, not an extra service. Every time we look at a new commercial account, we pull the current policy declarations and walk through every classification on the policy line by line. The class codes drive the premium. If they are wrong, you are either paying too much or you are heading toward an audit bill at the end of the year. There is no quote we can give honestly without doing this part first.
Workers’ compensation premiums are calculated using payroll multiplied by a rate that is specific to the class code assigned to that payroll. Each class code corresponds to a description of work — carpentry, clerical, restaurant service, retail sales, light manufacturing, and so on. The rating bureau publishes thousands of these codes, and each one has its own rate per hundred dollars of payroll. If a business has multiple types of work happening, multiple class codes can apply, and the payroll has to be split correctly between them. The right code combination produces an accurate premium. The wrong combination produces a premium that does not reflect your actual operations. Our workers’ compensation page covers the basics of how the premium is built.
If the class codes on your policy do not describe what your employees actually do, the premium is wrong — whether it is too high or too low, both directions create a problem.
Class-code errors are common because businesses change faster than insurance paperwork does. A contractor adds a new type of work and the policy never gets updated. A retail business adds a delivery driver and the new exposure never gets a separate class code. A manufacturer adds a service technician who travels to customer sites and gets coded as a factory worker because that is how the rest of the company is rated. None of these are intentional, but all of them produce premium problems. At the annual audit, the carrier reviews actual payroll by activity and adjusts the premium up or down based on what the operations really looked like. Underpaying during the year almost always means owing a sizeable audit bill in the spring. Overpaying means leaving money on the table for twelve months. We cover the broader pre-switch review in our coverage review FAQ, and the transition mechanics in switching business insurance mid-policy-term. The full commercial program overview shows how workers’ comp fits with the rest of your business coverage.
When we review a workers’ comp policy as part of a new-business quote or a transition, we walk through every class code on the current declarations and ask three questions. First, does this code match the actual job duties of the employees coded under it. Second, is the payroll allocated to this code accurate and consistent with how it would be reported at audit. Third, are there any employees or activities not represented on the current policy that should be. If the answer to any of those is no, we work with the underwriter on the new carrier to set the codes correctly from day one. That sometimes means a higher quoted premium than a competitor who used the wrong codes — and a much lower audit surprise at the end of the year. If you want a full class-code review on your current policy, request a commercial insurance quote and we will start there before quoting any new coverage.
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