WAC 296-17-31011   Classification system and plan.  (1) What is a workers' compensation classification system?

     A workers' compensation classification system is an objective method of collecting money (premiums) to pay the benefits of workers injured on the job. We believe the method used to spread this cost among the employers we insure should be fair and have some relationship to their hazard and potential for loss. Classifications are the tool used to achieve a fair method of distributing the risk among employers we insure. Objective boundaries are established for each classification. These boundaries describe the types of businesses which are included in the classification, as well as the operations and employments routinely encountered. We refer to these objective boundaries as the scope of the classification. Once these boundaries have been defined, we can begin collecting information about the employers assigned to each classification. The information includes the exposure which is being covered (risk) and the losses (claims) which are related to these businesses. Next, we use this information to establish premium rates that employers in each industry will pay for their workers' compensation insurance. Our goal is to produce fair insurance rates which reflect the hazardous nature of each industry. We have tailored our classification system in Washington to reflect industries found in our state. This makes our system responsive to change and provides rate payer equity to the employers we insure. Employers engaged in more hazardous industries such as logging will pay higher insurance rates than employers engaged in less hazardous businesses such as retail store operations.

     (2) Why is a classification system needed?

     We need a classification system to provide fair premium rates. Washington law (RCW 51.16.035) also requires us to have a classification system.

     (3) Is the classification system the same as the classification plan?

     No, we refer to the body of rules (WACs) which establish the general parameters of how classifications are to be used as the "classification system." These rules speak to the requirements of workers' compensation insurance and to our general classification approach, such as classifying by nature of business in the state of Washington, not by occupation of worker. The "classification plan" refers to all of the various classification descriptions which describe different types of business or industry. The classification system rules (general rules) will apply to all businesses unless another treatment is specifically provided for in the classification plan rules (special rules).

     (4) How is our classification plan designed?

     We have designed a plan which is keyed to the nature of the businesses or industries of the employers we insure. Our plan has over three hundred business or industry classifications. Each classification carries a premium rate which reflects the hazards that workers are exposed to. Descriptions of our classifications can be found in WAC 296-17A-0101 through 296-17A-7400.

     (5) Is your classification approach similar to the approach used by private insurance companies?

     Yes, we are required by law (RCW 51.16.035) to use the same classification (underwriting) approach used by private carriers.



[Statutory Authority: RCW 51.06.035, 51.08.010, 51.04.020. 07-12-045, § 296-17-31011, filed 5/31/07, effective 7/1/07. Statutory Authority: RCW 51.16.035, 51.04.020. 00-14-052, § 296-17-31011, filed 7/1/00, effective 7/1/00. Statutory Authority: RCW 51.16.035. 98-18-042, § 296-17-31011, filed 8/28/98, effective 10/1/98.]