Workers Compensation Class Codes
Many Employers have polices with
incorrect class codes costing them hundreds or thousands of dollars more
in premium for their workers compensation coverage.
What is a Workers Comp
A class code is a four digit code assigned by NCCI in order to
differentiate between the various job duties or scope of work
performed by employees. This classification system
contains over 700 unique codes and is the basis for underwriting
and pricing workers compensation coverage.
NCCI Class Codes
One of the primary components of pricing workers' compensation insurance is
classifying a risk or workplace exposure within the proper NCCI work comp
class code. Incorrect risk classification by insurance agents and/or underwriters
often results in premium that is too high, or conversely, lower premium that is
reclassified at the time of audit creating a large audit bill due.
In most states, the classification system used is one devised and
maintained by NCCI, the National Council on Compensation Insurance. NCCI
is an independent advisory organization largely funded by the insurance
companies who utilize their statistical analysis data. NCCI's function
is to develop and provide the statistical data used to set manual rates
for workers compensation and to develop individual employers' experience
mod's based on a ratio of claims to premium paid.
Non NCCI Jurisdiction States
There are a few states that do not use the NCCI classification system.
California, New Jersey, New York, Delaware, and Pennsylvania are states
that have their own classification systems. Texas licenses much of the
NCCI system, but makes significant variations in specific classification
rules. Many other states have some "state special" classifications that
can vary significantly from NCCI definitions for certain workplace
exposures. To see which states are NCCI jurisdictions and which have
independent rating bureaus, consult our state-by-state directory.
NCCI Scopes Manual
A scopes classification is comprised of a group of employers with
similar exposure to a type of hazard. A basic classification denotes a
particular type of business. 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 rates, and
to avoid unfair discrimination. 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 hazards.
A Scopes class code is the identifying number for an occupational
classification. It is a four-digit numeric code assigned to a specific
occupation of workers. The code is based on the nature of the business
of the employer.
For example: Class code 8810 is for a clerical exposure and class code
5645 is for a general residential construction exposure.
Classification Codes and Statistical Codes for Workers
Compensation and Employers Liability Insurance (Scopes Manual).
The Scopes Manual is a code book containing four-digit numerical
classification codes and the classification phraseology for each code
used in classifying workers' compensation risks, including state