American Association of State Compensation insurance Fund
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member fund.

CopperPoint Mutual Insurance Company
Phone: (602) 631-2000
Address: 3030 North Third Street
Phoenix, AZ   85012

State Compensation Insurance Fund
Address: 333 Bush Street
Suite 800
San Francisco, CA   94104

Pinnacol Assurance
Phone: (303) 361-4000
Address: 7501 East Lowry Boulevard
Suite 800
Denver, CO   80230-7006

Hawaii Employers' Mutual Insurance Co. Inc.
Phone: (808) 524-3642
Address: 1100 Alakea Street
Suite 1400
Honolulu, HI   96813

Idaho State Insurance Fund
Phone: (208) 332-2100
Address: 1215 West State Street
P.O. Box 83720
Boise, ID   83720-0044

Kentucky Employers Mutual Insurance
Phone: (859) 425-7800
Address: 250 West Main Street Suite 900
P.O. Box 83720
Lexington, KY   40507-1724

Louisiana Workers' Compensation Corporation
Phone: (225) 924-7788
Address: 2237 South Acadian Thruway
P.O. Box 83720
Baton Rouge, LA   70808

Maine Employers Mutual Insurance Company (MEMIC)
Phone: (207) 791-3300
Address: 261 Commercial Street
P.O. Box 11409
Portland, ME   04104

Chesapeake Employers’ Insurance Company
Phone: (410) 494-2000
Address: 8722 Loch Raven Boulevard
P.O. Box 11409
Towson, MD   21286-2235

SFM Mutual Insurance Company
Phone: (952) 838-4200
Address: 3500 American Boulevard West Suite 700
P.O. Box 11409
Bloomington, MN   55431-4434

Missouri Employers Mutual Insurance
Phone: (800) 442-0590
Address: 101 N Keene St
P.O. Box 11409
Columbia, MO   65201

Montana State Fund
Phone: (406) 495-5015
Address: 855 Front Street
P.O. Box 4759
Helena, MT   59604-4759

New Mexico Mutual Group
Phone: (505) 345-7260
Address: 3900 Singer Boulevard NE
P.O. Box 4759
Albuquerque, NM   87109

New York State Insurance Fund
Phone: (212) 312-7001
Address: 199 Church Street
P.O. Box 4759
New York, NY   10007

Workforce Safety and Insurance
Phone: (701) 328-3800
Address: 1600 East Century Avenue Suite 1
P.O. Box 4759
Bismarck, ND   58506-5585

Ohio Bureau of Workers Compensation
Phone: (800) 644-6292
Address: 30 West Spring Street
P.O. Box 4759
Columbus, OH   43215-2256

CompSource Mutual Insurance Company
Phone: (405) 232-7663
Address: 1901 North Walnut Ave.
P.O. Box 53505
Oklahoma City, OK   73152-3505

State Accident Insurance Fund (SAIF)
Phone: (503) 373-8000
Address: 400 High Street SE
P.O. Box 53505
Salem, OR   97312-1000

Pennsylvania State Workers Insurance Fund
Phone: (570) 963-4635
Address: 100 Lackawanna Avenue
P.O. Box 5100
Scranton, PA   18505-5100

Beacon Mutual Insurance Company
Phone: (401) 825-2667
Address: One Beacon Centre
P.O. Box 5100
Warwick, RI   02886-1378

South Carolina State Accident Fund
Phone: (803) 896-5800
Address: P.O. Box 102100
P.O. Box 5100
Columbia, SC   29221-5000

Texas Mutual Insurance Company
Phone: (800) 859-5995
Address: 6210 East Highway 290
P.O. Box 5100
Austin, TX   78723-1098

Workers Compensation Fund
Phone: (800) 446-2667
Address: 100 West Towne Ridge Parkway
P.O. Box 2227
Sandy, UT   84070

Washington Department of Labor and Industries
Phone: (360) 902-5800
Address: P.O. Box 44001
P.O. Box 2227
Olympia, WA   98504-4001

Wyoming Division of Workers Safety & Compensation
Phone: (307) 777-7159
Address: Cheyenne Business Center
1510 East Pershing Boulevard
Cheyenne, WY   82002

Workers Compensation Board - Alberta
Phone: (780) 498-3999
Address: 9925-107 Street
P.O. Box 2415
Edmonton, AB   T5J 2S5

Workers Compensation Board of British Columbia (WORKSAFEBC)
Phone: (604) 273-2266
Address: P.O. Box 5350 Station Terminal
P.O. Box 2415
Vancouver, BC   V6B 5L5

Manitoba Workers Compensation Board
Phone: (204) 954-4321
Address: 333 Broadway
P.O. Box 2415
Winnipeg, MB   R3C 4W3

Phone: (506) 632-2200
Address: 1 Portland Street
P.O. Box 160
Saint John, NB   E2L 3X9

Workers Compensation Board of Nova Scotia
Phone: (902) 491-8999
Address: 5668 South Street
P.O. Box 1150
Halifax, NS   B3J 2Y2

Prince Edward Island Workers Compensation Board
Phone: (902) 368-5680
Address: 14 Weymouth Street
P.O. Box 1150
Charlottetown, PE   C1A 7L7

Saskatchewan Workers Compensation Board
Phone: (306) 787-4370
Address: 200 - 1881 Scarth Street
P.O. Box 1150
Regina, SK   S4P 4L1

Puerto Rico State Insurance Fund Corporation
Phone: (787) 793-5959
Address: G.P.O. Box 365028
P.O. Box 1150
San Juan, PR   00936-5028
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Latest Newsletter

Effects of Misclassifying Class Codes for Insureds

By Jody B. Horton, LWCC

If you have ever been at the underwriter’s desk, you’ve found yourself looking at an account that appears to be too good to believe. The loss runs look great, you have a full description of operations, and safety controls are immaculate.  Then you realize you’re using the wrong class code by relying on the current policy, which is misclassifying the account, and your premium is too low. You really want to write this account, but it’s impossible to compete using the correct classification. Why not continue using the incorrect class code? After all, the current carrier has been doing it for years with good results.  A seasoned underwriter understands the potential adverse effects this can have for insureds.  As we will soon see, misclassifying an insured’s policy can affect their experience modifier, which in turn could prevent the insured from securing work contracts. Additionally, it could adversely affect the underwriting process when submitting to new carriers for quotes.

An insured might reap the benefits of lower premiums for many years if their account is misclassified with a lower-rated class code, especially if they do not have any claims. However, in the long run, this could cause the  experience rating (EMOD) to be calculated incorrectly. When the National Council on Compensation Insurance (NCCI) calculates EMOD’s, they use a factor called Expected Loss Rate or ELR. This represents the expected loss for each classification per $100 dollars in payroll for the particular class of business. If the insured is classified to a lower rated class code, the EMOD will use a lower ELR for the calculation, which will in turn create a higher than necessary EMOD. This could also work in the insureds favor if they are using a higher rated code than necessary; it would cause the EMOD calculation to use a higher ELR, creating a deflated EMOD. An insured will usually not complain about paying lower premiums but may be concerned if their EMOD is overstated due to the policy being misclassified. Even if the class code is corrected it will take some time for the misclassified policy data to fall out of the calculation if the carrier does not correct the data with NCCI. Therefore, it may be a while before the EMOD is correct.

Many states have a heavy concentration of a particular industry. In Louisiana, for example, the petro-chemical industry has a large presence. Insureds who service these petro-chemical plants pay careful attention to their EMOD because it is a safety measure. If the insured’s EMOD surpasses a certain threshold mandated by the plant, their current service contract with that plant may be in jeopardy or they might never get the chance for a contract in the first place. If the class code has been misclassified, their EMOD will be incorrect and could create issues with their ability to obtain contracts.

More frequently we are seeing insurance carriers develop their version of a straight through quoting system. In its simplest form, carriers create systems with a decision tree, and underwriting data is fed through the tree. If the submission meets all of the criteria, a quote is developed without any human intervention. In my observations, the EMOD is one such criteria. If NCCI is using the incorrect historical data provided by the current carrier to create the EMOD, it could adversely affect the insured in securing the most competitive premium by a carrier, which in turn would affect the insured’s bottom line. If the submission is stopped and designated for underwriting review, the underwriter will hopefully catch the mistake and correct it if written with the carrier.

In summary, when reviewing potential new accounts, we as underwriters should not entertain using an incorrect classification when quoting business. Using the wrong classification is not beneficial to an insured or a carrier in the long run. It could negatively affect the premium amounts and revenue sources, as well as making the insured’s business an unattractive risk for the competitive insurance market place. As carriers, we should have our insured’s best interest at heart, charge an adequate but not excessive premium, and never misclassify a risk.



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