California Workers’ Compensation Market Is Hardening

After nearly a decade of soft market conditions and falling premiums, California’s workers’ compensation landscape is experiencing a significant shift.

According to multiple industry sources, including the 2026 US Workers’ Compensation Market Outlook from Risk & Insurance, California’s combined loss ratio reached 127% in 2024. This is the highest level in more than two decades. That means carriers are projected to pay $1.27 in losses and expenses for every $1.00 in premium earned which is triggering a rate response and stricter underwriting practices.

Because California represents nearly 25% of the national workers’ compensation market, what happens here influences pricing, underwriting, and coverage trends nationwide.

Why California Costs Are Rising

Several key factors are currently reshaping the workers’ compensation landscape in California according to Risk & Insurance:

• Medical and Legal Cost Inflation: Rising medical pricing, medical-legal billing charges, and indemnity costs are driving severity higher.
• Cumulative Trauma Claims: CT claims now account for nearly 25% of California indemnity claims, far above national averages, increasing claim complexity and cost.
• Remote Litigation (“Telelegal”): Virtual hearings have expanded litigation activity statewide, increasing defense costs and frequency.
• Wage Inflation: When wages go up, workers’ comp benefits increase too, especially disability payments, and it’s even more noticeable with California’s minimum wage increases.

These combined influences have reversed the pattern of declining rates, resulting in increased premium expenses across the state.

How This Is Changing Underwriting

Carriers are tightening their approach and returning to more disciplined underwriting including:

• Higher minimum premiums
• Fewer discretionary credits
• More frequent debits on experience mods
• Net renewal increases of 20% or more, even on clean accounts

Here’s my advice for California employers and their 2026 workers’ comp renewals:

• Start early: 90+ days before expiration
• Review loss runs and reserves carefully: inconsistencies can be costly
• Clearly describe your risk management strategies, focusing on your safety programs and return-to-work protocols for employees.
• Check your payroll and class codes: small mistakes can lead to significant costs

As your broker, I am committed to a proactive, strategic approach to your workers’ comp renewals, going beyond reactive tactics. This allows us to address potential issues upfront, ensuring the best outcomes for your business.

By working together, we can create impactful risk narratives, making your work comp insurance more desirable for underwriters. We can also adopt a proactive strategy to uncover cost-effective solutions through audits and in-depth reviews of safety documentation, guaranteeing the most favorable pricing and coverage.

Workers’ comp in California is at a turning point and the employers who plan ahead will be the ones who control cost, maintain coverage, and avoid last-minute surprises in 2026.