Why Set Fabrication Isn’t Construction – and How Misclassification Is Costing You Thousands.
Most scenic and experiential fabrication companies are misclassified, and it costs them tens of thousands of dollars every year.
If you design and build sets, retail fixtures, or branded environments, there’s a good chance your insurer has you coded as construction company. That simple mistake can double your premiums overnight.
You may think – “What’s wrong with that? I employ carpenters, I employ painters, I even do some welding.”
You’re correct in thinking that you have a lot in common with the operations of a contractor or construction company. You’re using the same tools, materials, and methods to build something custom to the specifications of the client. If it walks like a duck and talks like a duck, right? Wrong!
That mindset has allowed insurer carriers to grossly overcharge scenic and experiential fabricators for years. Not just by a few dollars, in some cases we cut premiums by 50%!
What are Classifications?
Classifications, or class codes, are a standardized way for insurance carriers to rate your insurance policies. Every policy includes classifications, but none impact you more than Workers Comp and General Liability. The class codes drive your rate, your premium audit, and your coverage. Their purpose is to capture your operations as efficiently as possible, using the fewest number of codes. The goal isn’t to classify each time you cut a piece of wood, paint a wall flat, or install a job, but rather put as much work as possible into one class code to simplify your audit.
Each class code comes with a standard definition which tells what operations it applies to, and more importantly, what operations it doesn’t.
Class codes were first standardized in 1978, long before experiential marketing or event fabrication even existed. In the 50 years since, they have not been updated enough to reflect all the new industries and changing technologies.
What’s the Difference?
There are several key differences between Experiential Fabrication and Construction, from an insurance perspective.
1) The location of the work. Most Set/Scenic fabrication work happens within the shop. You are designing and building your product in house and then delivering and installing on site. Conversely, Construction companies complete all their work on the job site. What’s the difference? Your shop is a controlled and private environment. Your staff is aware of the corners, the pitch of the floor, and their available working space. You control the housekeeping and ensure that it remains a clean and organized environment. A Construction company working on a job site does not always have that luxury. They can set a site perimeter and control the job site as best they can, but it is still an unknown and uncontrolled environment. There may be other subs working on that job site and there may be members of the public passing by. All those variables lead to increased likelihood of claims.
2) The finished product. The definition in the “Carpentry” class code will mainly apply to constructing or repairing buildings exceeding three stories in height. It also applies to bleachers, grandstands, and bridges. Some other examples from the class code definition are the production of framing members, sheathing, and roof trusses. Just a bit riskier than your pop-up retail activation.
Those differences aren’t just operational; they are the foundation of how your risk should be priced.
Misclassification Ripples Through Every Policy
Misclassification doesn’t stop at your premium; it rewrites your entire insurance story.
It’s obvious why being misclassified as a Construction company would raise your rates. You’re paying insurance rates for much more hazardous operations than you have. However, the misclassification has other effects outside of just your rate.
Most insurance companies have specific departments dedicated to writing Construction risks. Even well-meaning construction underwriters might welcome your business, but their coverage templates often include exclusions that don’t belong in your policy. Every carrier has underwriting guidelines, dictated by classification, on what coverages are applicable to each account. So, if you are classified in Construction, that underwriter may automatically have to put on several exclusions that you would not have to accept otherwise.
Insurance underwriters also use classifications as a quick pre-qualification on whether they want to write the account. Every carrier has an internal “appetite guide” which gives underwriters a Green, Yellow, or Red light on whether they should proceed. That Construction class code comes up with a Red light for plenty of underwriters that otherwise would write your business. Any time your available marketplace shrinks, your premium inflates even further.
In short, misclassification limits your market, adds exclusions, and inflates your costs.
What Do We Do About It?
At ISSI, we kept running into fabrication shops that were frustrated, confused, and overcharged.
Every time, the story was the same:
They rarely had claims.
They had strong safety protocols.
But their insurance was priced like they were building homes.
So we built a better way; a process that rebuilds your insurance program the same way you build your projects: with accuracy, precision, and craftsmanship.
The Coverage Blueprint
That’s why we created The Coverage Blueprint; a process built to reconstruct your insurance with the same precision you bring to every project.
The Coverage Blueprint is our five-step process that ensures your insurance fits your business:
Audit – We review your existing policies and classifications.
Map – We analyze how your shop operates: who does what, where, and how.
Rebuild – We align each classification and coverage to match your real exposures.
Align – We match you with insurers that understand your type of work.
Review – We monitor renewals and audits to keep your premiums accurate year after year.
And it works. After correcting their Workers Comp classifications, one scenic shop saw their rates decrease by 29% and 61% without changing carriers. Same insurer. Same operation. Just better representation.
Once your Coverage Blueprint is in place, you can stop overpaying for misapplied risk — and finally feel confident your insurance is designed around your true operations.
Stop Paying for Someone Else’s Risk
If your insurance program still treats you like a construction company, it’s time for a rebuild. Schedule your Coverage Blueprint Review and find out if your coverage, classifications, and premium truly fit your business.
Request a Coverage Blueprint Review
Bob Jacobs, VP of Sales – rjacobs@issi-nj.com (732)-738-6080