As part of its duty administering the Standard Classification System, the WCIRB conducts studies to determine whether a new classification should be established or an existing classification should be deleted. In addition, classifications are studied to ensure that they reflect current industry practices. These studies may be initiated by WCIRB staff, or by external requests from the Department of Insurance or from an employer group.
When reviewing classifications, the WCIRB considers three primary factors:
While many requests for a new classification meet the first two conditions, many fail on the third. Many employer groups that are considered for a new classification are not large enough to develop a statistically credible pure premium rate.
Often, individual employers approach the WCIRB to request a classification study to determine whether a new classification should be established. Generally, the WCIRB does not initiate studies without broad support from the industry. Typically, industry groups are instrumental in the performance of the study as they are able to provide a definition of the industry and a listing of California employers within the industry. Once a new classification study has been initiated by the WCIRB, requests for the study cannot be withdrawn. For this reason, prior to contacting the WCIRB to initiate a study, the WCIRB encourages industry representatives to conduct their own research to consider the overall impacts of a new classification on its membership.
If a study is performed and it is determined that a new classification is necessary, the WCIRB will propose a new classification in its regulatory filing with the California Department of Insurance. The new classification will be proposed regardless of the corresponding rate. The corresponding pure premium rate for the new classification may be higher or lower than the pure premium rate for the classification to which the companies are currently assigned.
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