Technology associated with construction has dramatically changed operations. Carefully check the class codes and their descriptions to assure proper premiums.
Years ago, 5606 - contractor supervisors - served to describe on-site personnel who actively performed construction activities while managing the site. The rate was equivalent to site carpenters. That code has evolved into the computer-carrying, service-providing construction managers and executives who document the construction process. The rate is closer to outside sales representatives now. For guidance on managing on-site personnel and related coverage issues, see Understanding Construction Insurance and Employee Conduct.
Even excavation and site work is being dramatically changed by GPS technology. Now computers design cut-and-fill patterns with greater efficiency. Labor is more involved in checking the geotechnical and environmental properties of the soils rather than the actual movement of them.
As production technology improves, new sub-codes develop to reflect the decrease in risk. Painting, carpentry, electricians and other trades now use a selection of eight or ten separate codes to describe exact activities. More components are built in shops and brought to the site, and that process can change the class code of the installers and the builders.
The trend is toward more computer-driven operations: less general labor and more specialists. As this trend continues, class codes will be added, deleted, and descriptions changed. For a closer look at how operations changes affect insurance classifications, see Changes in Construction Insurance Operations.
There are currently hundreds of class codes; some are antiquated or have shifted meanings over time. It pays to become familiar with the classifications. If your business has been active for many years, the "governing code" may be incorrect. The governing code is the catch-all for your business that best describes the overall operation, which is often clearer in manufacturing. For how classifications relate to documentation and premium considerations, review Insurance: class codes, documentation, D&O, and premium pricing.
Corrugated box manufacturing, for example, has been reorganized into several class codes: laminating processes, cutting and folding processes, and fully integrated operations. Those distinctions affect both classification and rates.
Read your relevant class codes and think about which one reflects your operations, or ask your agent to do it for you.
Frequently Asked Questions
How do class codes affect my insurance premium?
Class codes categorize the operations and risks of a business; the assigned code helps insurers set rates based on the perceived exposure associated with that work.
What if my business operations have changed since my policy was written?
Notify your insurer or agent so they can review classifications and update the governing code if needed to reflect current operations.
Can the same company have multiple class codes?
Yes—companies performing distinct activities may be assigned multiple class codes to reflect different exposures for various operations.
Where can I get help understanding which class code applies?
Your insurance agent or broker can review your processes and recommend the appropriate classifications based on current operations.