National Council on Compensation Insurance (NCCI)

NCCI is a critical component within the entire workers' compensation insurance system. With over 900 employees, NCCI facilitates a better ecosystem for states, insurance companies, agents, and business owners. Their data and research enables both states and insurance companies to make critical decisions that affect the cost of workers' compensation insurance.

What Does NCCI Do?

• Collects data on millions of claims and policies
• Analyzes trends regarding the cost of workers' comp
• Manages NCCI codes via the Scopes Manual
• Makes recommendations for workers comp rates
• Administers state fund policies in some states
• Promulgates experience modification rates in most states
• Researches claims and state workers' comp regulations

NCCI Collects and Distributes Data

The insurance industry operates by offering coverage based on a calculated expected risk. NCCI has the broadest and deepest workers’ compensation database in the entire insurance industry.

Because of this collection and storage of historical claims data for particular industries, insurance carriers can price their policies based on a predictable risk factors. NCCI provides the information by gathering and storing data. Included in this data is 68.8 million medical data transactions, 3.3 million insurance policies, detailed claim information for about 210,000 claims, and residual market financial information representing approximately $900 million in written premium and $5.3 billion in current loss reserves.

Analyzes Workers' Compensation Trends

NCCI analyzes trends on a geographical and an industry basis. It does this to help carriers make better informed decision on how much to charge for premium based on a likelihood of a business filing a claim and how much those claims are expected to cost. Without this data, insurance carriers would not be making informed decisions and the cost for insurance premium would likely be much higher.

NCCI Scopes Manual

NCCI is the creator and overseer of the Scopes Manual. The NCCI Scopes Manual is used by insurance professionals to identify workers’ compensation class codes associated with each employee based upon the activities the employees do as part of their job. Each year there are between 700 and 800 individual classification codes.

If a business has employees that have different job responsibilities, those employees should be classified under separate classification codes. For instance, an office employee does much less risky activities and the premium for these employees is much less than a construction employee roofer. Keeping an accurate payroll is extremely important to make the end-of-term workers comp audit process run smooth.

NCCI Recommends Insurance Rates

Based on the data NCCI collects and the internal analysis, the organization recommends minimum and maximum premium rates for each individual class codes and states. There are nearly 800 unique classification codes. Each class code is designated because the duties related to each type of work function carry their own unique risks associated with the job.

NCCI Offers Loss Cost Recommendations

NCCI offers loss cost recommendations for 35 states and the District of Columbia. NCCI communicates the recommendations through annual experience filings with the member states. NCCI relies on Financial Call Data that includes premiums, losses, claim counts, and expenses reported by state and by year. Loss Cost is teh actual costs for claims in state specific class code. Insurance companies use this data to calculate their own final rates for the various class codes.

Calculates EMR Ratings (Emod)

39 states rely on NCCI to calculate and issue experience modification rates to qualifying business owners on an annual basis. Emod's are bases on a companies payroll and claims costs. The factor compares business to the average of all the same businesses in the same state. An EMR Rating is based on the prior the 3 years prior to the most recent policy period. Claim frequency also influences the Emod.

Cost Analysis of Proposed Legislation

Each year, NCCI comes out with a Regulatory and Legislative Trends Report. As part of this report, NCCI tracks state and federal workers’ compensation bills. This can include legislation related directly to workers’ compensation systems; but also legislation related to first responders, prescription drug abuse, and even marijuana legalization. Multiple states are proposing legislation to allow first responders suffering from Post-Traumatic Stress Disorder (PTSD) to be covered under the workers’ compensation system. This could drastically increase the amount insurance carriers are forced to pay out to keep the workers' compensation systems solvent.

Depending upon the amount of additional increase in cost, it is safe to predict insurance carriers will raise rates a similar amount. Legislation that gets prescription drug abuse under control can benefit the workers’ compensation systems in a positive way because the injured workers will be using less medications and will remain on partial disability for a shorter amount of time. As medical marijuana legislation is passed throughout more states throughout the country, more doctors are subscribing the medicine. Whether or not legislation requires the workers’ compensation to cover medical marijuana can have an enormous impact on the costs related to the system in that state.

NCCI States

NCCI provides services to the following states: (link to state for more details)

These are the states that currently partner with NCCI for purposes of recommending minimum and maximum pure premium ratings for workers’ compensation insurance. These states have determined that NCCI can provide this service more efficiently than the state Department of Insurance could do on its own.

NCCI Codes

A workers’ compensation class code is a 3 or 4-digit number that insurance underwriters and agents use to identify specific categories of job duties. Not all states choose to partner with NCCI regarding these employee classification designations. Currently there are 35 states and the District of Columbia who use the services of NCCI for their workers’ compensation system. There are 11 states that use their own rating bureau. These bureaus are usually a part of the Department of Insurance in these states.

Four states are what is referred to within the insurance industry as monopolistic states. Being a monopolistic state means the workers compensation system in these states does not recognize coverage purchased in another state. Most other states have reciprocity laws that govern employees when they cross state lines. When a business has an employee who conducts business in a monopolistic state, the business needs to make sure to secure coverage within the monopolistic state. These issues can be dealt with by thoroughly discussing the operations of your business with your independent insurance agent.