Washington Administrative Code › Title 296 - Labor and Industries, Department of › Chapter 296-17 - General reporting rules, audit and recordkeeping, rates and rating system for Washington workers' compensation insurance › Section 296-17-31029 - Insurance principles

Current through Register Vol. 24-14, July 15, 2024
(1)
What
			 insurance principles does the department of labor and industries use when a new
			 classification is developed?
Those principles are broken down into four major components as
				follows:
"
Administration
"
Equity
"
Homogeneity
"
Safety
A detailed explanation of these principles can be found in
				subsection (2) of this section.
(2)
What are these principles?
"
Administration:
Recordkeeping
							 requirements must be simple and easy to follow. If our classification system
							 imposed burdensome recordkeeping requirements, most employers would find it
							 difficult to comply. Resolving complaints related to burdensome recordkeeping
							 requirements would be in nobody's interest. The premium rate for your basic
							 classification is based on the
average
exposure to hazard of
							 all your workers. If our classification system were based upon individual
							 occupations, you would pay a lower rate for your workers whose duties are
							 considered low hazard, but you would pay a higher rate for your workers who
							 have duties that expose them to a greater hazard. The total premium you pay
							 would not be decreased; it would only be redistributed and would require more
							 recordkeeping. Having one basic classification assigned to cover all the
							 operations makes recordkeeping and reporting easier for you.
"
Statistical credibility or equity:
By
							 monitoring our classification plan, we ensure that enough hours are reported in
							 each classification to provide a meaningful statistical base. A large enough
							 statistical base helps avoid sudden large increases or decreases in rates and
							 keeps them at the lowest possible level. We refer to this as
statistical credibility
. Classifications must also be
responsive to change
if equity and fairness are to be
							 achieved. Our classification plan is in a constant state of evolution. In the
							 early 1970s we had approximately 45 classifications. Today we have over 300
							 main classifications and approximately 1,000 subclassification codes to track
							 losses. In some industries, the evolution is gradual, and no change to the
							 classification itself is needed. We recognize that the wording used to describe
							 a classification may not have kept up with changes in an industry. However, as
							 the industry conditions evolve because of modern equipment, new processes or
							 materials, or changes in employment laws and safety standards, so does the
							 experience upon which the rate is based. In other words, the changes in the
							 experience which is used to develop premium rates
reflect
new
							 developments in processes, equipment, and technology even though the wording in
							 the classification is unchanged. We strive to keep our classification language
							 current. Although it would be easy to just change the classification wording as
							 we encounter changes in an industry, Washington law requires that we conduct
							 public hearings before we make official changes to the rule. We do this as a
							 public safeguard and to involve business in the change process. As technologies
							 change or new industries develop, we receive requests from industry
							 representatives for new classifications or for determination of proper
							 classification assignments for the new processes. We will evaluate the request
							 and determine if there is a large enough group of employers to justify a new
							 classification. Any classification must produce enough premium to cover losses.
							 In addition, as specific industries become obsolete or certain processes are no
							 longer in use we will discontinue the classifications that covered them.
"
Homogeneity:
Although it is rare that
							 any two businesses are identical, our classification plan recognizes that
							 similar businesses have similar exposures to occupational injury and disease.
							 Employers with similar operations and exposures are grouped together so each
							 classification includes common exposures and carries a rate that reflects those
							 exposures. This method of grouping
homogenous
risks ensures
							 that the overall cost of the workers' compensation system is distributed fairly
							 among the businesses we insure. Classifications must also be
mutually
							 exclusive
. Our classifications are clearly defined so that each type
							 of business or industry fits in only one basic classification.
"
Workplace safety and accident
							 prevention:
By classifying employers by the nature of their business,
							 each industry can take responsibility for controlling its own workers'
							 compensation costs. Employers may belong to a trade association, which usually
							 offers safety or risk management services. If such services result in fewer and
							 less costly accidents, that improved experience will tend to lower the base
							 rates for that industry. If our classification system were based upon the
							 occupations or duties of employees, the success of a single industry's safety
							 or risk management program would have little impact on its premium
							 costs.
Example:
Many retail grocery stores employ
				meat cutters. If grocery stores wanted to reduce the frequency of injury to
				their meat cutters they could develop a safety plan that focused on proper meat
				handling, lifting, and cutting. Assuming the safety program was successful and
				reduced the cost associated with meat cutter claims, the rate for grocery
				stores would go down. If, on the other hand, all meat cutters, such as those
				who work for restaurants, grocery stores, or slaughter houses, reported in a
				single meat cutter classification, it is doubtful that the grocery stores'
				safety program would have any impact on the premium rates since grocery stores'
				meat cutters would represent only a small portion of a meat cutter
				classification.
Statutory Authority:
				  RCW
				  51.16.035. 98-18-042, § 296-17-31029,
				  filed 8/28/98, effective 10/1/98.