California Workers’ Compensation: First Rate Increase in a Decade

For the first time in 10 years, California’s workers’ compensation rates are increasing.

The state has approved an 8.7% rate increase, driven by sharply rising claim costs and industry-wide financial strain.

The Workers’ Compensation Insurance Rating Bureau (WCIRB) projects the 2024 Accident Year Combined Ratio at 127%. This is the highest ratio since 2001.

Put simply, carriers are paying out $1.27 for every $1.00 of premium collected, which is unsustainable without pricing adjustments.

Why Are Costs Rising?

There are three major culprits behind the jump in workers’ compensation costs:

1. Cumulative Trauma (CT) Claims
   CT claims are injuries that occur over time rather than from a single incident. They are rising rapidly. These claims are more complex, harder to close, and often stay open for years, adding significant cost to the system.
2. Rising Medical Costs
   After years of stability, medical costs turned sharply upward in the past year. Factors include higher provider charges, more advanced (and expensive) treatments, and longer recovery times.
3. Increased Litigation
   Loss adjustment expenses are climbing as litigation becomes more common. Disputes over claims often extend case duration’s and increase settlement values.

Together, these trends are straining the workers’ comp system. Unfortunately, employers will start to feel the impact as a result. It shows in the form of higher premiums.

What This Means for Employers

If you’re a California employer, expect workers’ comp pricing to firm in the coming policy renewal cycles. While legislation may eventually need to address systemic cost drivers, the immediate impact is higher insurance costs.

Now [and always] is the time to:

• Focus on claims prevention: Invest in workplace safety programs and early intervention for injuries.
• Review your claims history: Cumulative trauma claims often arise when small issues aren’t addressed quickly.
• Work with an experienced broker: Having the right advocate can help you navigate pricing changes. They can also help you in exploring coverage options. Additionally, they implement risk management strategies to control costs.

My Take

While rate increases are never welcome news, disciplined carriers and proactive employers can still manage costs effectively. As your broker, our role is to help you stay ahead of these changes. We control risks and make sure you’re partnered with carriers who remain stable, consistent, and service-oriented. This is crucial in a hardening market.

-JK