NCCI is a non-profit insurance rating bureau dedicated to fostering a healthy workers compensation system for the states the organization partners with. NCCI gathers data, analyzes industry trends, provides objective insurance rates, and loss cost recommendations in an attempt to bolster the health of the systems within the states it partners with.
NCCI currently partners with 35 states to provide pure premium ratings, 11 states have their own rating bureaus, and there are four states that are referred to as Monopolistic States. These four states; North Dakota, Ohio, Washington, and Wyoming do not represent workers compensation policies that are bought through another states system. This causes a bit of a headache for businesses that operate in more than one state and one of these states is one of them. Most workers compensation carriers have specific packages for these types of businesses, but it does add to the cost a bit when purchasing coverage. The 11 states who have their own rating bureau do so for a number of reasons. Some states, like New York and California, have economies that are so large and the economies so unique the state legislature feels the state governing body can do the task better in house. For the most part, states that partner with NCCI see favorable rates on workers compensation premium for the business community within the state.
Three Main Tasks Provided by NCCI:
- Obtain and Provide Accurate Statistical Loss Data
- Scopes Manual
- Set Manual Rates for Workers Compensation Insurance
Obtain and Provide Accurate Statistical Loss Data
Data collection and statistical analysis is one of the best assets of NCCI for the states it works with. Collecting all of the claims history from each carrier operating within a state and validating the data is a huge undertaking. This is a job that would be very costly and time consuming for the department of insurance to take on. The ability to have an organization like NCCI to take this process off the hands of the state governing body allows the workers compensation systems to pass this cost savings on to the business community within the state.
The NCCI scopes manual is used by insurance professionals to identify the NCCI workers compensation class codes associated with each employee based upon the activities the employee partakes on a daily basis. Each year there are around 700 different job classification codes. These codes are for the employee and not the business. The code is a three or four digit number associated with a type of work. If you have employees who work in an office setting for parts of their job and out doing other activities at other points of the day or week, than it is important to keep an accurate payroll for those differences. The more accurate your payroll is, the easier the audit process will be at the end of the term.
Set Manual Rates for Workers Compensation Insurance
The rate making process is another huge undertaking that NCCI takes on for its partner states. The rate making process is the largest determining factor towards what businesses within a state pay for workers compensation coverage. The rates are mathematically based, producing an objective pricing system. Each ncci class codes is given a number and that number is multiplied by the employer’s annual payroll in $100 units. This is often referred to as the “manual rate”. This rate covers security for the system in the form of weekly benefits paid directly to injured workers. The manual rate also covers the workers compensation system by making sure payments to doctors and hospitals are covered. By doing an effective job of this service NCCI saves keeps the state business community solvent and provides a healthy business community for both the employer and employee.