Workers' Compensation Classification  Codes

A classification code is a three- or four-digit number assigned to a business when they’re quoted a workers’ compensation insurance policy. 

Also known as a class code, this standardized system allows insurance carriers to easily describe what the business does, and allows similar businesses to be grouped together for analysis and rate assignment.

Classification Code Lookup

Trying to look up workers’ compensation rates by classification code? There are hundreds of different classification codes. The easiest way to find out the code that best fits your business is to use an easy online quoting tool. This will help you search for the correct code for your business in your state, and also give you an immediate, no-obligation quote from leading carriers. 

What Are Class Codes?

What does “Starting Gate Corporation” do? How about “Thomas & Associates”? Does “Anderson Painting” do residential interior jobs — or scale five-story buildings?  

Workers’ compensation insurance protects employees in the event of a workplace-related injury or illness. To accurately assess the risk and provide enough coverage, insurance carriers need to understand the type of work employees do. That’s where classification codes come in.

Classification codes give insurance carriers, agents and rating agencies a shared language to label businesses based on the products or services they offer.

What Class Codes Look Like

Class codes are usually a three- or four-digit number followed by a brief description of the business type. Most states use NCCI’s classification codes (jump to: How Class Codes Are Assigned). NCCI class codes are four digits and the ones we use as examples throughout this post. 

NCCI Codes, SIC Codes, NAICS Codes: What's the Difference?

Let's break these down at bit more:

SIC Codes: The Standard Industrial Classification (SIC) system was primarily used in the U.S. to classify industries with a four-digit code. Implemented in the 1930s, its main purpose was to promote the uniformity and comparability of statistical data related to market research.

For example:

• 5812: Eating Places
• 7389: Business Services, Not Elsewhere Classified
• 8062: General Medical and Surgical Hospitals

NAICS Codes: The North American Industry Classification System (NAICS, pronounced "nakes") was developed in the 1990s to replace the SIC system. It uses a six-digit code that allows for more specific categorization and is updated every five years to accommodate new industries. NAICS is used by federal statistical agencies in North America for collecting, analyzing, and publishing statistical data related to the business economy.

For example:

• 445110: Supermarkets and Other Grocery (except Convenience) Stores
• 541330: Engineering Services
• 621111: Offices of Physicians (except Mental Health Specialists)

NCCI Codes: The National Council on Compensation Insurance (NCCI) system is used for workers' compensation insurance purposes. It classifies businesses according to the type of work they do, so that insurance companies can accurately gauge risk levels and determine premiums.

For example:

• 8810: Clerical Office Employees
• 8742: Salespersons, Collectors or Messengers, Outside
• 5403: Carpentry - NOC (Not Otherwise Classified)

In other words, NAICS or SIC codes can help you identify the correct classification for your business, but you likely need to translate that to the correct NCCI code (or whichever classification system your state uses) when buying workers' compensation insurance.

Decoding Classification Codes

1. Consider your typical business operations. Don’t classify based on what you could do. Focus on what you have actually done — the products or services you provided over the past year. 
2. Search by industry. If using a lookup tool, type in key words that describe your business to narrow down your search to options within your industry. 
3. Choose the classification code description that most accurately describes your business operations. Look at the most specific descriptions first.
4. “NOC” is short for “Not Otherwise Classified.” Only select this if none of the descriptions fit your business.

Remember: Correct classification of your business helps in statistical analysis, regulation compliance, and ensuring appropriate insurance coverage. Not only that, but class codes are audited annually and directly impact premiums.

That's why it’s a good idea to reach out to the experts in workers’ compensation insurance. A few quick questions from them can get your business covered properly — saving you time and headaches.  

Governing Class Codes

Most companies (even small businesses) have more than one class code. Often there is a governing class code which represents the overall product or service being offered by the company. But within the company there may be other classification codes. Common ones include: 

• 8810 – Clerical Office Employees
• 8742 — Salespersons Or Collectors — Outside

 

Class codes matter for two main reasons: compliance and cost. As we mentioned earlier, the class code allows the insurance company to provide adequate coverage based on the relative risk for an employee injury. 

It’s similar to how an insurance company would want to know the make and model of your car, the age of a driver, or what year your house was built. This data is used to understand the risk and coverage that is needed.

Classification codes are also used for actuarial analysis, or collecting and interpreting large sets of data. By grouping together similar businesses, workers’ compensation insurance rating agencies can collect data such as: 

• Number of claims filed 
• Amount per claim paid out. 
• Total healthcare expenses for workers’ comp claims. 
• Days of work missed by injured workers (and wages paid out as part of the claim).

This data can reveal patterns between industries, and help the state workers’ compensation system keep a pulse on overall costs. Analyzing these large data sets allows the rating bureaus to understand the relative risk between different business types to assign an appropriate rate to each.

Workers’ Compensation Rates and Class Codes

This brings us to rates. Workers’ compensation insurance rates are part of the formula used to calculate the insurance premium.

The rate is assigned to the entire classification code, so every business with that class code in the state receives the same base rate. That said, there are other ways insurance companies adjust premiums on a case-by-case basis.

How Class Codes Are Assigned

Workers’ compensation is regulated at the state level, so each U.S. state decides which rating agency it uses to assign classification codes and rates. Most states use the codes defined by the National Council on Compensation Insurance (NCCI), an independent organization that collects workers’ compensation data on U.S. businesses.

States That Don’t Use NCCI

• California
• Delaware
• Indiana
• Massachusetts
• Michigan
• Minnesota
• New Jersey
• New York
• North Carolina
• Ohio
• Pennsylvania
• Washington
• Wisconsin

States That Use 3-digit Codes

• Delaware 
• Pennsylvania 

Class codes are assigned based on asking questions about a company‘s operations. Common questions include: 

• How would you describe your business? 
• What tasks do employees perform? 
• Do employees work at heights? 
• Do employees operate heavy machinery? 
• Do you offer delivery services? 

Depending on the industry, specific follow-up questions may help the insurer better understand the risks that employees are put in, such as working at certain heights or depths, operating cars or machinery, or working with particular substances.

Who Gets Assigned a Class Code?

The final thing to understand about classification codes is which workers to include. A workers’ compensation insurance policy can cover anyone who works for a company. But based on state work comp law, businesses are legally required to cover particular workers under the policy.