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Definition of Classification Code

A system of insurance risk classification that is based on occupational or industrial categories. It is a three or four digit code that is assigned by a United States insurance rating and data collection bureau (NCCI), or a State Rating Bureau. A classification code helps to differentiate between the various job duties or "scope of work performedby employees. Classification code is one of the primary components of pricing workers' compensation insurance by classifying a risk or workplace exposure. There are over 700 unique codes which form the basis for underwriting and pricing a workers' compensation insurance policy.

In most states, the classification code is one that is devised and maintained by the National Council on Compensation Insurance (NCCI). NCCI is an independent advisory organization that is largely funded by insurance companies who utilize their statistical data for rating. There are some states, such as California, Delaware, Pennsylvania, New Jersey and New York that do not use the NCCI classification code. They use their own classification system. Texas licenses a large part of the NCCI system, but makes significant variations in specific classification rules.

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