Workers’ compensation class codes are numbers assigned by insurance companies to different job titles. These numeric codes help insurance companies determine workers’ compensation insurance costs for different businesses based on the risks associated with each type of job at the business.
In most states, insurance companies get these codes from the National Council on Compensation Insurance (NCCI). The NCCI is a nonprofit national rating bureau for workers’ compensation insurance. While funded mainly by insurers, the NCCI provides its class codes based on industry data and trends they’ve analyzed independently.
The NCCI produces a comprehensive list of about 700 codes used for workers’ compensation in most states. It also makes judgment calls on the proper use of classification codes and can perform an audit if misuse of codes is suspected.
Codes are shared across occupations if the NCCI determines they share the same level of risk. Code 8810, for example, is used to classify air traffic controllers, computer programmers, museum curators, newspaper publishers, and more.
As you might expect in an insurance classification system, occupations that involve more risk have higher associated workers’ compensation costs.
Even occupations in the same industry with different levels of risk have different codes. Carpentry, for example, have a different code from plumbers. Or if the types of work overlap some, such as a florist and a landscape gardener who both work with flowers and plants, they would have different codes and workers’ comp rates.
Thirty-five states use NCCI class codes to determine workers’ comp insurance rates. The rest operate with independent or monopolistic state codes.
Independent state codes are just what they sound like — the state has its own independent rating bureau. Employers in the following states can expect slightly different rules and compensation codes than those found in NCCI states:
In monopolistic states, private insurance companies are not allowed to sell workers’ compensation insurance, so there is no rating bureau. Instead, in these states, employers must purchase coverage from a government insurance fund:
Class codes affect the workers’ compensation rates you pay. This is why businesses with more than one type of employee often use multiple codes.
For example, a small construction company may use separate codes for their project managers (NCCI code 5606), general construction workers (NCCI code 8227), and clerical office employees (NCCI code 8810). Employees performing different tasks with different associated risks should be classified differently on your workers’ compensation insurance plan.
Occasionally, you may see the abbreviation NOC or “not otherwise classified” on your workers’ comp policy. It means that the insurance underwriter or auditor could not place your business in a more specific classification code and assigned it a more general code.
If you accidentally select an NCCI classification with a lower cost, auditors will likely catch the mistake (state regulators require audits in most states). If the cost has been underestimated, you will pay the difference. If auditors find willful misclassification, you might be responsible for fines or other penalties, depending on your state.
Another possible consequence of miscoding is that your insurer could refuse to pay for injuries sustained during work duties that are clearly outside the scope of the classification for that employee. This will leave you liable for the costs.
Workers’ compensation class codes are there to help determine your risk and price your workers’ compensation insurance correctly. By not having to assess the risk of every job, the NCCI and state rating bureaus ensure insurance providers are acting fairly and giving you the coverage you need.
Whether you live in a state with NCCI class codes like Georgia or Florida, or independent states with their own ratings bureau like Minnesota or North Carolina, NEXT Insurance helps you identify the right workers’ compensation class codes for your business through a painless online quote process.
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