Workers’ compensation is a game of rules. Like all other games, from Monopoly to football, if you don’t know the rules, you’re going to find it difficult to win.
We don’t normally think of insurance as a “game,” but you definitely have to know the rules in order to get the best results for your clients. These rules are readily available. But it’s been my experience that agencies rarely have these rules at their disposal. They choose instead to rely on experience to guide them.
Experience is a great resource. But when things change, as they often do, experience can become more of a liability than an asset. That is why it is imperative that agents have access to the manuals that govern a workers’ compensation policy.
In states governed by NCCI (National Council on Compensation Insurance), there are three key manuals:
1) Basic Manual
This is the manual that contains information on the basics of workers’ compensation. Here you will find the rules for classifying a business. What are the standard inclusions and exclusions for classifications? What money that you give to employees is included or excluded from the workers’ comp premium calculation? And so on.
Also of critical importance in the Basic Manual: What are the rules governing how classifications can be changed both during and after a policy period?
2) Experience Rating Plan Manual
The rules covering the Experience Modification Factor are vast. This manual explains in detail each of the elements of the Experience Modification Factor and how they are calculated. For instance, if you are going to cancel and rewrite a workers’ comp policy, how can you know what policy periods will be included on an Experience Mod?
If a clients buys a business, what are the rules relating to their separate Experience Mods (hint: they are almost certainly required to be combined)? The Experience Rating Plan Manual also has the rules on which businesses are required to have an Experience Mod and what changes can be made to the mod during the policy period.
3) Scopes Manual
For the different types of business, NCCI has defined just over 600 distinct classifications. This manual contains each of those classifications, spelled out in detail. It is critically important that clients be classified correctly, otherwise they are in grave danger of being overcharged and you are in grave danger of losing a client.
The Scopes Manual has a wider reach than the two manuals previously mentioned, as it covers 42 states and the District of Columbia. The exceptions are Wyoming, North Dakota, Michigan, Washington, Texas, Pennsylvania, New Jersey and Delaware.
These manuals also include the exceptions for each of the states governed by NCCI, as well as several states with independent bureaus. These exceptions are critically important, and not knowing them can be costly. As a simple example, the national rule is that pay for vacation time is included for workers’ compensation premium determination. However, that’s not the case in Kansas. It’s not hard for money to add up quickly for your client.
The NCCI manuals are available online and in print for a fee. However, in several states, manuals are available at no cost in PDF format.
Manuals provide the basis for all workers’ compensation policies. I’ve barely scratched the surface. Without this information, it’s impossible to know if clients are having the rules applied correctly to them or not. Log in to your bureau’s web site today and find out how to access these manuals.