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A class code is a three or four digit numerical code assigned by NCCI or a State
Rating Bureau such as California's WCIRB. Class codes are assigned to differentiate between the various job duties or
scope of work performed by employees. NCCI's classification
system contains nearly 800 unique class codes and is the basis for both pricing and
underwriting workers' compensation insurance rates. NCCI is the abbreviation for the
National Council on Compensation Insurance. They provide statistical data to insurance
companies and states.
One of the primary means of pricing workers' compensation
classifying a risk, or workplace exposure, within the proper NCCI workers'
compensation class code. Incorrect risk classifications by insurance agents or
underwriters will result in an inaccurate premium. Payroll may be reclassified and moved to
the correct class code at the time of audit. This could result in a policy credit or debit.
A workers' compensation audit
is the process to make sure payroll was appropriately estimated and employees were correctly
In most states, the workers compensation classification system used is maintained by NCCI, the National Council on Compensation Insurance. NCCI is an independent
advisory organization largely funded by the insurance companies. Both insurance companies and states utilize NCCI's statistical data for rating and pricing coverage. NCCI's function is to develop and provide
the statistical data used to set manual rates for workers compensation insurance. This process is done, individually, for each state that utilizes NCCI. These manual rates are used for pricing and to assign each employers' annual Experience
Modification Rate, These NCCI worksheets, or Experience Modification Ratings are developed based on a ratio of claims frequency and cost of premium paid.
NCCI was found in 1923. They help cultivate a healthy workers compensation system. Their objective data and trend analysis promotes competition between insurance companies. Their data is also used by states and insurance companies to set rates for each class code based on prior underwriting profitability or losses.
National Council on Compensation Insurance
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Each classification code is comprised of a group of
employers with a similar
exposures, or types of hazards. A basic classification code denotes a particular
type of job duty within a business. Therefore, a class code is the systematic
arranging of properties, persons, or business operations into groups or categories
according to certain criteria. This arrangement is done to create a basis for
establishing statistical experience and determining workers compensation rates, and
to avoid unfair discrimination by insurance companies. The essential concept of
"fair discrimination" is that each risk should bear its fair share of the overall
cost of expenses and losses in relationship to its own relevant expenses and
A Scopes class code is the identifying number for each occupational classification.
It is the numeric code assigned to a specific occupation of
workers. The class code is based on the nature of the work for the employer and employee.
It is common for most employers to have two or more class codes on their policy.
For example: Class code 8810 is for a clerical exposure and class code 5645 is for a
general residential construction exposure. A contractor might have laborers working
under class code 5645 and an office person rated under the clerical class code.
Classification Codes and Statistical Codes for Workers Compensation and Employers
Liability Insurance (Scopes Manual)
The Scopes Manual is the industry standard workers
compensation class code book containing numerical classification codes and the
phraseology for each code used in classifying workers' compensation risks, including
state special codes. The NCCI Scopes Manual is available for purchase from NCCI.
If your business has ever been through a worker comp audit, then you know that the auditor is trying to determine if all payroll is accounted for and if it was assigned to the proper workers' comp code or codes. If an auditor determines that employees were incorrectly classified, the insurance company can retroactively bill your business for up to 3 years of misclassified premium.
Incorrect workers' comp codes can also adversely affect a businesses experience modification factor over time. Claim frequency and loss ratios may be skewed from the industry norm and your business may end up with a higher experience modifier, or EMR rating. This ultimately increases the cost of workers comp insurance.
Some insurance companies may even cancel coverage when a business is found to have incorrect class codes. Anytime a carrier cancels coverage it gets reported to NCCI. Many carriers won't offer workers comp quotes to a business that has had a policy canceled by another carrier.
There are a few states that do not use the NCCI
California, New Jersey, New
York, Delaware, and
classification systems. Many other states have some "state special" classifications
that may vary significantly from NCCI standard definitions for certain workplace
classification codes. To learn more about class codes under NCCI's jurisdiction
visit our state workers
Our Workers Compensation Specialists take the time to review your current work comp
class codes in order to make sure we quote your employees and policy correctly. We
work directly with NCCI to validate your job classifications and have been
successful in recovering past premium from insurance companies who have incorrectly
classified your business. Most states allow us to recoup up to three years of
As an employer, you have the right to appeal to NCCI for proper classification
assignment. This process may include submitting all job duties to NCCI and paying
for an NCCI auditor to come to your facility for an inspection and ruling. In most
cases, our Specialists can work with NCCI representatives on your behalf to
ensure your employees are properly classified with the classification codes that
accurately reflect the scope of work performed and reduce your rates and premium.
Start a quote or pick a state to learn more.
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