The Importance of Workers Compensation Code Classification

The National Council on Compensation Insurance (NCCI) currently utilizes over 700 class codes. These four digit codes represent the specific work duties and job classifications assigned to each employee. Code classifications contain detailed descriptions of work and represent the hazards associated within the process of their job duties.

For Example
Class code 8810 is for clerical employee who work at computers. This employee faces less risk of injury compared to a carpenter that performs work on upper stories (class code 5403) because there are less hazards associated with desk jobs than construction of buildings. Because of this difference the workers compensation rates differ from class code to class code.

The Importance
Correctly classifying employees is an important part of the workers compensation insurance quoting and risk management process. If employees are misclassified businesses may end up paying higher rates or risk owing additional premium after an audit. Classification codes are complicated and proper assignment is critical to have the correct premium charged for a workers comp policy.

Every state uses a different set of class codes from various state rating authorities. Each of these codes comes with distinct rating which factors into the premium calculation. With so many class codes to choose from it’s easy to see how misclassification errors can occur.Under state law businesses are obligated to accurately report the duties their employees perform. Improperly coding employees will be discovered during annual insurance audits, and purposefully misrepresenting employees duties can be considered fraud resulting in fines or even prison time.

Help with Workers Compensation Class Codes
When employees roles and duties change their workers compensation class code must also be adjusted. Some carriers allow for employees to split class codes based on their diverse duties but check with your insurance agent before doing so. The NCCI manual can be consulted to find the correct workers comp class codes.

Workers Compensation Insurance can be confusing terrain. Contact one of our agents today for a no cost assessment of your business insurance needs.