Moore: Are Lower-Cost Standard Exceptions Disappearing for Insureds?

Tuesday, October 4, 2022 | 0

One of the most common questions I receive now from risk managers concerns the lower-cost standard exceptions disappearing now. Let us first cover the Workers' Compensation Insurance Rating Bureau's definition of a standard exception class code:

James Moore

In addition to employees who perform basic business operations, nearly all businesses have clerical office workers, and many have outside salespersons. These activities, referred to as “standard exceptions,” are a deviation from the one-business, one-classification rule. Since clerical office work and outside sales activities are commonly performed and carry a relatively low risk of injury, most businesses are permitted to use these “standard exception” classifications for the workers who conduct exclusively clerical or outside sales work.

Common standard exception class codes

Three of the most popular lower-cost standard exceptions are:

• 8810 clerical.
• 8742 outside salespersons.
• 8871 telecommuters.

Some of our most popular articles cover the lower-cost standard exceptions.

Shift away from lower-cost standard exceptions examples

Why I decided to write this article on subjects I have covered so many times is the increasing concern from employers when the classification codes are changed to encompass all employees. For example:

• 8874 electronic instruments manufacturing; data transferred from 8810, 8742 and 8859.
• 4512 biomedical research labs; data transferred from 8810.

Check out this article on the three reasons why class code changes are necessary. One is the dynamics of how companies have quickly evolved over the last few years. That makes sense for the most part.

Pandemic had great influence

Many employers switched employees from inside the office to working from home. The lower-cost standard exception code 8871 had been put in place for many years at the National Council on Compensation Insurance and recently by WCIRB.

The telecommuter class code payroll grew very quickly. Two articles that cover 8871 written in the last two years are California Adds 8871 Class Code and 8871 Class Code Now Popular.

Yes, much payroll had been moved to or combined with other more expensive class codes. However, so much payroll, due to the pandemic, had been moved away from the main business class codes to the lower-cost standard exception codes.

Bottom line: With the changing of the definition of class codes, make sure your agent or someone at the carrier explains any changes including:

• The large movement of payroll inside of the class codes on your policy or premium audit.
• Elimination/addition of class codes, especially the lower-cost standard exception codes.
• Anything that gives you a bad gut reaction to your policy or premium audit.

This blog post is provided by James Moore, AIC, MBA, ChFC, ARM, and is republished with permission from J&L Risk Management Consultants. Visit the full website at www.cutcompcosts.com.