Wednesday, July 27, 2011

Who is the NCCI & What is the Importance of Proper Workers Compensation Classification for Businesses

The National Council on Compensation Insurance (NCCI) based out of Boca Raton, FL is one of the countries largest database managers of workers compensation insurance information. In fact, NCCI helps to analyze industry trends and risks associated with them in order to help others prepare workers compensation insurance rates, while providing a combination of services, which help to maintain a healthier overall workers compensation system (NCCI Holdings, 2011).

Contrary to many people’s beliefs, the NCCI is not a rating bureau; instead, the organization is often referred to as an advisory committee because its board of directors is comprised of insurance executives and/or companies, which at times may seem a little biased, as these individuals or companies are in business to make a profit. Nevertheless, having a board made up of top-notch executives and companies who compete in the industry make it a little easier to help determine a fair classification system for the approximately 700 different workers compensation classification codes, which cover almost any employee or workplace exposure or does it?

One of the most elementary parts of pricing workers compensation insurance for a client is by properly classifying a company’s workplace exposures into one of these several hundred codes previously mentioned. Indeed, each code developed by the NCCI carries with it an individual rate that is based on that codes exposure within a particular workplace. For example, the classification codes for a clerical or sales worker usually carry with them significantly lower rates versus classification codes that may be associated with a roofer or logging, as the workplace exposure of these different types of jobs are extremely different (mostly inside positions versus outside positions). However, when the exposure is not so obvious, classifying a specific exposure can be very complicated and something a business owner wants to be absolutely sure of since a misclassification can cost a business a lot of money they didn’t necessarily expect to pay if something does go wrong or they end up getting audited.

Today employers can use multiple classification codes on a policy or a company can classify their workforce under one as a group but it is important to document or provide records that show what exact tasks workers complete or how they are split their time between different comp codes if using multiple codes. What the costs (annual premiums) are for a policy most of the time are based on an employer’s annual payroll, which can be in the form of a standalone policy or a Professional Employer Organization (PEO) arrangement. Therefore, for a decision maker of a company or the business owner, it becomes even more important to understand these different codes and make sure your employees who perform work for you are correctly classified for the actual work they perform. As a result, you could save a lot in the annual premiums and rates you receive in return.

Perhaps the most important part about all this is that the details the NCCI provides insurance carriers (i.e. SCOPES Manual) in regards to the many workers compensation codes is that this manual is NOT available anywhere unless you purchase the proprietary material or subscribe to the NCCI online database. However, as a Business Consultant and Doctorate of Business Administration Candidate who researching this as well as other industries, I welcome anyone to contact me directly for an analysis. Having this expert opinion on whether your employees are classified correctly or not could even save you and/or your company money, while minimizing costs or any additional fees for a misclassification. Providing you with this knowledge and service will help both of us sleep better at night.

As always and as I continue my research, you can expect more analysis and opinions about this along with other common issues found in advancing technologies and the workplace, which at times can make it hard for you to focus on your core business. Of course, the information that I continue to provide here are my views and not views and/or opinions of any others but views based upon real world research, which the title of my Blog depicts. Until next time, keep smiling, as it really does look good on you!

NCCI Holdings, Inc (2011). National Council on Compensation Insurance. NCCI, retrieved on July 24, 2011 from: