NCCI Scopes and Workers' Comp Classifications
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
hazards.
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
classification
phraseology for each code used in classifying workers' compensation risks, including
state special codes. The NCCI Scopes Manual is available for purchase from NCCI.
Why You Want to Correctly Classify Employees for Workers Comp?
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.
Which States Do Not Utilize NCCI Class Codes?
There are a few states that do not use the NCCI
classification system.
California, New Jersey, New
York, Delaware, and
Pennsylvania utilize
their own
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
compensation
directory.
