How important is it to correctly identify industry type in determining Industry Classification?
Really important! If the type of business is improperly classified, a business owner could pay significant additional premium at the end of the policy term. The workers’ compensation industry uses a standard set of three- or four-digit “classification codes” assigned by either a State Rating Bureau or the National Council on Compensation Insurance (NCCI) depending upon the state. Each code reflects the risk associated with the duties or “scope of work performed” for employees at a particular type of company. As a result, this classification is the basis for the workers’ compensation insurance rates assigned to that job. Incorrect industry identification generally means the premium charged is either higher or lower than appropriate, resulting in a large workers’ compensation premium payment, or credit due, when the policy’s mandatory premium audit is conducted.