The WCIRB devotes significant resources to perform approximately 15,000 classification inspections each year to ensure that classifications are assigned accurately and that data is properly reported to the WCIRB. The accuracy of classification assignments is important as the information is used in two major WCIRB products – advisory classification pure premium rates and experience modifications (via expected loss rates). Classification inspections are vital to maintaining the integrity of the Standard Classification System. In order to maximize the value of these inspections, the WCIRB selects employers for inspection as high priority based on certain factors:
Classifications Potentially Misassigned: Each year the WCIRB’s Actuarial department reviews unit statistical and experience modification data to identify classifications that are most often misassigned.
Fluctuating Classifications: Where significant exposure for an employer has been reported in a classification one year but is reported in a different classification the following year.
Persistently High or Low Experience Modifications: Employers with chronically high or low experience modifications are reviewed individually and may be prioritized for inspection.
Large Employers: Although employers with very large operations can be challenging to inspect due to their size and complexity, routine inspections of large employers are of high value for ratemaking accuracy.
Classification Studies: The WCIRB performs studies of classifications each year to maintain the integrity of the Standard Classification System. As part of this process, employers are selected for inspection to obtain information vital to the completion of the study.
Approximately one-third of the classification inspections that the WCIRB performs annually are made pursuant to these characteristics. The WCIRB continues to review and refine the methodology used to identify and perform inspections that have the greatest impact in ensuring data accuracy.