Workers Compensation Insurance Rating Bureau of California Workers Compensation Insurance Rating Bureau of California Report on Bed Spring or Wire Mattresses Mfg. Excerpt from the WCIRB Classification and Rating Committee Minutes July 27, 2010 About this Report The WCIRB prepares and presents reports to the WCIRB s Classification and Rating Committee to assist in the formulation of proposed changes to the Insurance Commissioner s regulations. Once adopted by the Classification and Rating Committee, the recommendations contained in the report are provided to the WCIRB Governing Committee and may be included in a WCIRB regulatory filing that is submitted to the Insurance Commissioner for approval. About the WCIRB The WCIRB is California's trusted, objective provider of actuarially-based information and research, advisory pure premium rates, and educational services integral to a healthy workers' compensation system. Learn more at www.wcirb.com.
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Report on Classification 3300 3300, Bed Spring or Wire Mattresses Mfg. Executive Summary Objective Pursuant to its policy of reviewing classifications with low statistical credibility, the WCIRB studied Classification 3300, Bed Spring or Wire Mattresses Mfg., to determine whether this classification should be eliminated and its constituents reassigned to one or more existing classifications. Findings Based upon its review of Classification 3300 and its constituents, the WCIRB finds the following: 1. Classification 3300 develops insufficient payroll and loss data to generate a statistically credible pure premium rate and the reported payroll has declined significantly over the past few years; 2. There are only three policyholders currently assigned to Classification 3300: a. Two firms manufacture bed springs; b. One firm manufactures box spring assemblies. 3. The operations contemplated by Classification 3300 are comparable to the operations contemplated by Classification 3257, Wire Goods Mfg. N.O.C. Recommendations The WCIRB recommends the following: 1. Eliminate Classification 3300, Bed Spring or Wire Mattresses Mfg.; 2. Reassign the manufacture of bed springs and wire mattresses to Classification 3257, Wire Goods Mfg. N.O.C. 3. Amend the footnote to Classification 2570, Mattress or Box Springs Mfg., to (1) include a description of the operations contemplated by this classification and (2) state that the manufacture of bed springs and wire mattress assemblies shall be classified as 3257, Wire Goods Mfg. N.O.C. 1 W C I R B California
Introduction Pursuant to its policy of reviewing classifications with low statistical credibility, the WCIRB studied Classification 3300, Bed Spring or Wire Mattresses Mfg., to determine whether this classification should be eliminated and its constituents reassigned to other classifications. Classification History 1915: Classification 3301, Mattress wire, established as one of the original classifications in the Manual of Compensation and Liability Rules & Rates. 1920: Classification 3301 eliminated. Classification 3300, Bed Spring or Wire Mattresses Mfg., established. Description of Operations Classification 3300, Bed Spring or Wire Mattresses Mfg., is assigned to firms that fabricate bed springs and wire mattress assemblies. Operations include receiving steel or iron wire as well as purchased metal and wooden frames. Machinery, such as wire shapers, straighteners and crimpers, are used to fabricate the wire into either spiraled coils (bed springs) or wire frame component parts. Bed springs may be sold as is or used to fabricate wire mattress assemblies. In addition, wire may be laced together to form inner spring assemblies. Wire is cut and bent to produce mattress frame ends. As required, the wire is transferred to ovens to be tempered by baking. Wire coils are assembled into metal framework with metal clips, nuts or bolts and wire frame component parts and ends are attached and secured by spot welding to produce wire mattress assemblies. The resultant bed springs and wire mattress assemblies are sold to mattress and box spring manufacturers. In addition, wire coils may be assembled into purchased wooden frames, primarily by stapling, to produce box spring assemblies that will be upholstered and covered by separate concerns. The WCIRB identified three policyholders engaged in the manufacture of bed springs or wire mattresses assignable to Classification 3300, Bed Spring or Wire Mattresses Mfg.: 1. Two firms manufacture bed springs as described above. In addition, these firms manufacture finished mattresses and box springs, which are assigned to Classification 2570, Mattress or Box Springs Mfg. including pillow, quilt or cushion manufacturing. 2. One firm manufactures box spring assemblies. These operations consist of receiving spring coils, wire frame tops and wooden frames. In addition, purchased wire is formed, crimped and spot welded to produce wire frame components. The purchased spring coils and wire frame tops, as well as the fabricated wire frame components, are assembled into the wooden frames with metal clips or stapling to produce box spring assemblies. Classification 3300 Payroll and Loss Experience The table below summarizes the payroll and loss data developed under Classification 3300 for the most recent five years of available data: Table 1 Classification 3300: Payroll and Loss Experience Year No. of Unit Reports Payroll Losses Loss-to-P/R Ratio 2002 7 5,616,339 155,383 2.767 2003 7 5,157,098 19,164 0.372 2004 7 5,924,988 520,977 8.793 2005 8 3,799,805 150,609 3.964 2006 10 3,014,446 316,588 10.502 23,512,677 1,162,721 4.945 Classification 3300 Credibility Factors 2 W C I R B California
Indemnity Medical 0.29 0.38 As indicated above, the firms assigned to Classification 3300 do not generate sufficient experience to produce a statistically credible pure premium rate. This fact is underscored by the wide year-to-year fluctuation in loss to payroll ratios. The WCIRB received between seven and ten Unit Statistical Reports (USR) for each of the years shown above; however, only three policyholders currently are assigned to Classification 3300. A review of all USRs received for the above five-year period shows that 16 different policyholders reported payroll in Classification 3300. Of these, 12 were labor contracting firms and one firm went out of business in 2006. Classification Analysis Since the products fabricated by the three firms currently assigned to Classification 3300 are for use exclusively in the mattress and box spring industry, consideration was given to assigning the bed spring and wire mattress manufacturing operations to Classification 2570, Mattress or Box Springs Mfg. including pillow, quilt or cushion manufacturing. Classification 2570, Mattress or Box Springs Mfg. including pillow, quilt or cushion manufacturing, contemplates the manufacture of finished mattresses and box springs. Operations include the receipt of innerspring mattress assemblies or wooden box frames. Metal springs are received and attached to box frames by stapling. Quilted mattress fabrics and box spring cover materials are received, measured, cut to size and sewn to produce mattress and box spring covers. Polyurethane foam and polyester fiber padding are set in place after which the covers are placed over the mattress or box spring assemblies and secured with sewing or stapling to complete. Although wire spring and box spring assemblies are used exclusively in the manufacture of mattress and box springs, Classification 2570 does not contemplate the fabrication of wire products, the use of machinery to form wire or similar metal working operations. A review of the WCIRB s library of inspection reports indicates that for the 30 employers assigned to Classification 2570, only two firms manufacture bed springs or wire mattress assemblies, which is separately classified as 3300 in accordance with the footnote to Classification 2570 that states [t]he manufacture of wire springs shall be separately classified. Since the operations contemplated by Classification 3300 are not comparable with the operations contemplated by Classification 2570 and mattress and box springs manufacturers (Classification 2570) typically do not make bed springs and wire mattress assemblies, WCIRB staff does not recommend reassigning bed spring and wire mattress manufacturing to Classification 2570. Staff compared bed spring and wire mattress manufacturing operations to the operations contemplated by Classification 3257, Wire Goods Mfg. N.O.C. Classification 3257 contemplates the manufacture of a wide variety of wire products such as springs, grading screens, chain link fence material, display racks and other similar wire products. Operations include passing wire through automatic spring coiling machines, forming machines, crimping machines and similar machinery to coil, form and cut wires. Wire may be crimped, sheared and/or cut with handheld tools and secured by spot welding. The operations performed by firms currently assigned to Classification 3300 are similar to those assigned to Classification 3257. Firms assigned to both classifications use machinery to form and cut wire, and handheld tools to crimp or shear wire. In addition, both industries contemplate assembling wire into different patterns to form a desired product. Since the machinery used and operations described by both classifications are comparable, the WCIRB recommends reassigning the operations contemplated by Classification 3300 to Classification 3257. 3 W C I R B California
To assess the impact on policyholders of assigning bed spring and wire mattress manufacturing to Classification 3257, WCIRB staff compared the 2010 pure premium rates for Classifications 3300 and 3257. As reflected in Table 2 below, the pure premium rate for Classification 3257 is 32.9% less than that of Classification 3300. Table 2 Comparison of 2010 Pure Premium Rates 3300 vs. 3257 Classification 3300 Classification 3257 Difference 6.93 4.65-2.28 (-32.9%) As indicated in Table 3 below, the combination of the payroll and loss data developed by bed spring and wire mattress manufacturers (Classification 3300) with wire goods manufacturers (Classification 3257) will increase the selected loss to payroll ratio for Classification 3257 by 2.2%. Table 3: 3257 and 3300 Combined vs. 3257 Comparison of Selected (Unlimited) Loss to Payroll Ratios at Policy Year 2010 Level Classification 3257 and Classification 3300 Combined Classification 3257 Difference 3.661 3.582 +0.079 (+2.2%) Conclusion and Recommendations Classification 3300 does not generate sufficient payroll and loss experience to generate a statistically credible pure premium rate, and therefore, Classification 3300 should be eliminated. Bed spring and wire mattress manufacturing is comparable to the operations contemplated by Classification 3257. Therefore, the WCIRB recommends the following: 1. Eliminate Classification 3300, Bed Spring or Wire Mattresses Mfg.; 2. Reassign the manufacture of bed springs and wire mattresses to Classification 3257, Wire Goods Mfg. N.O.C.; and 3. Amend the footnote to Classification 2570, Mattress or Box Springs Mfg., to (1) include a description of the operations contemplated by this classification for clarity; and (2) state that the manufacture of bed springs and wire mattress assemblies shall be classified as 3257, Wire Goods Mfg. N.O.C. Accordingly, the WCIRB recommends that the following changes to Part 3 of the California Workers Compensation Uniform Statistical Reporting Plan 1995 (USRP) be included at the time of the next pure premium rate filling. If this change is adopted, the WCIRB will revise the Rulings and Interpretations Supplement to the USRP for consistency. 4 W C I R B California
Proposed Changes to the California Workers Compensation Uniform Statistical Reporting Plan 1995 Related to: 3300, Bed Spring or Wire Mattresses Mfg. Recommendation Eliminate Classification 3300, Bed Spring or Wire Mattresses Mfg., as it is no longer statistically credible. PROPOSED BED SPRING OR WIRE MATTRESSES MFG. 3300 * * * * * * * Recommendation Amend the footnote to Classification 2570, Mattress or Box Springs Mfg. including pillow, quilt or cushion manufacturing, to state that bed spring and wire mattress manufacturing shall be classified as Classification 3257, Wire Goods Mfg. N.O.C. PROPOSED MATTRESS OR BOX SPRINGS MFG. including pillow, quilt or cushion manufacturing 2570 This classification contemplates the receipt of bed springs and wire mattress assemblies, which are subsequently fitted with padding and fabric covers to produce mattresses, or secured into wood frames and fitted with padding and fabric covers to produce box springs. This classification also contemplates the manufacture of foam core mattresses. The manufactureing of wire bed springs and wire mattress assemblies shall be separately classified as 3257, Wire Goods Mfg. N.O.C. * * * * * * * 5 WCIRB California
Recommendation Amend Part 3, Standard Classification System, Section VIII, Abbreviated Classifications Numeric Listing, for consistency with other proposed changes. PROPOSED Section VIII Abbreviated Classifications Numeric Listing 3300 Bed Spring or Wire Mattresses Mfg. * * * * * * * Recommendation If the Insurance Commissioner adopts the changes to the California Workers' Compensation Uniform Statistical Reporting Plan 1995 (USRP) detailed above, the WCIRB intends to update the Rulings and Interpretations companion to the USRP. Set forth below are staff s changes. PROPOSED Metal Products 3300 Bed Spring or Wire Mattresses Mfg. * * * * * * * Appendix I Standard Manufacturing Classifications 3300 Bed Spring or Wire Mattresses Mfg. 6 WCIRB California
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