Careers Business Ownership National Council on Compensation Insurance (NCCI) Share PINTEREST Email Print Ildo Frazao / Getty Images Business Ownership Operations & Success Business Insurance Sustainable Businesses Supply Chain Management Operations & Technology Marketing Market Research Business Law & Taxes Business Finance Accounting Industries Becoming an Owner By Marianne Bonner Marianne Bonner Marianne Bonner, a certified CPCU and ARM, worked in the insurance industry for 30 years as an analyst and underwriter among other roles and holds multiple professional designations. Marianne has written many articles for International Risk Management Institute's Risk Report. Learn about our Editorial Process Updated on 02/04/20 The National Council on Compensation Insurance or NCCI is a national rating bureau that focuses on workers' compensation insurance. It is a non-profit organization owned by insurance companies. The NCCI provides services to insurers, state governments, insurance agents, regulatory authorities, legislatures, and other parties. Services Provided The NCCI performs rating and other functions on behalf of insurers in thirty-six states. These states are called NCCI states. Each year, workers' compensation insurers in these states report their premiums and losses to the NCCI. The organization collects the data, analyzes it, and then uses the results to provide services to insurers. Here are some of the functions the NCCI performs: Creates and publishes a uniform classification systemCalculates rates or loss costs, and makes filings to state regulators Creates and publishes an experience rating planCreates an experience rating worksheet for individual employersAnalyzes costs of proposed and enacted legislationCreates and publishes workers' compensation policy forms and endorsementsPrepares statistical reportsConducts research on claims, disability, and other issues related to workers compensationProvides access to current regulatory informationEducates insurance industry professionals on matters related to workers' compensation Rate-Making and Classification Two key functions performed by the NCCI have a direct effect on employers. These include rate-making and the classification system. In many states, the NCCI calculates loss costs rather than rates. Loss costs typically include losses (benefits paid to injured workers) plus loss-adjustment expenses. Insurers add charges for commissions (to agents and brokers), taxes, licenses, and profit to calculate a final rate. For each of the thirty-six states, the NCCI periodically evaluates the current loss costs or rates to ensure they are adequate but not excessive. This process involves several steps. First, the NCCI reviews the aggregate premium and loss data it has collected from insurers operating in a particular state. This is to determine whether insurers have experienced more or fewer losses in that state than initially projected. Next, the NCCI evaluates premium and loss data for each class code. Losses may have been higher than expected in some industry groups but lower than expected in others. Depending on the results, the NCCI may recommend an increase or decrease to some or all of the loss costs or rates used in that state. NCCI's classification system is used to categorize employers based on the nature of their business. Businesses that perform similar operations are assigned to the same category. Each classification is identified by a written description and a four-digit code. For example, Hardware Stores are assigned class code 8010. Standard Policy Forms The NCCI has developed a standard policy form called the Workers' Compensation and Employers Liability Insurance Policy. This form was revised in 2011. It can be identified by its form number, WC0000000B. It is used in the thirty-six NCCI states, and in many independent states as well. The NCCI has developed a variety of endorsements that can be used to add, remove, or modify coverage under the basic policy form. An example is the Voluntary Compensation endorsement. Advisory Services Only The NCCI is an advisory organization, not a regulatory commission. It can recommend increases or decreases in loss costs or rates but states ultimately decide whether to implement those recommendations. Moreover, states may adopt the NCCI's products to suit their needs. Thus, many states utilize a modified version of the NCCI's classification system, rules, and endorsements. For instance, a state may have developed its own four-digit code for a particular classification in place of the standard code. A state may also develop its own version of one or more NCCI endorsements. Independent and Monopolistic States Fifteen states do not utilize the services of the NCCI. Four of these states are called monopolistic states because they require employers to purchase workers' compensation insurance from a state-operated insurance fund. These states prohibit the sale of workers' compensation policies by private insurers. The monopolistic states are Wyoming, Washington, Ohio and North Dakota. The remaining eleven states that don't utilize the NCCI's services are called independent states. These states rely on their own workers' compensation bureau to perform rate-making and other essential functions.