Blog - Tag: Workers’ Comp
Bureau Recommends Workers’ Comp Benchmark Rate Hike
California’s workers’ compensation rate-making agency has recommended that average benchmark “pure premium” rates increase by 10.4% for policies incepting on or after Sept. 1, 2026.
The Workers’ Compensation Insurance Rating Bureau cited an increase in cumulative trauma claims as well as rising medical and administrative costs. The filing, if approved by the California Department of Insurance, would be the second consecutive year that the benchmark rate insurers use to price their policies has increased. Last year the DOI approved an 8.1% hike after WCIRB had recommended an 11.2% increase.
The pure premium rate increase has not resulted in employers with few or no workers’ compensation claims paying higher premiums since insurers only use the pure premium rate as a guidepost when pricing their policies. The pure premium rate remains at historical lows and the market is quite competitive.
The 10.4% recommended increase is an average across all the state’s workers’ compensation class codes, and each class will see a different change.
Here’s a look at the cost drivers:
Cumulative trauma claims
WCIRB estimates that 26.4% of all workers’ comp claims filed in the state in 2025 are for cumulative trauma injuries, compared to 15% in 2021. CT claims are not for sudden injuries, but rather those that develop over time through repetitive motions, such as:
- Carpal tunnel syndrome — Often claimed by office workers, data entry personnel and assembly line workers due to repetitive hand and wrist movements.
- Chronic back and neck injuries — Caused by years of lifting, bending, twisting or maintaining poor posture.
- Tendonitis and tendon disorders — Inflammation from repetitive shoulder or arm movements, common in construction, warehouse and food service jobs.
- Shoulder injuries — Rotator cuff tears or bursitis from repetitive overhead lifting.
- Knee problems — Develops from repetitive kneeling, squatting or climbing stairs, frequently seen in plumbers or floor layers.
About three out of every five CT claims are filed after an employee is terminated, according to WCIRB. There is a cottage industry of lawyers who find recently laid-off workers and convince them to file these claims. Adding to the cost: nearly all CT claims are litigated, in most cases from the first notice.
Medical costs
One anomaly in CT claims is that they usually have few medical costs in the first year, which masks the growing issue of rising medical costs for workers’ comp claims. According to WCIRB, average medical costs per claim increased 1.7% between 2021 and 2023, but excluding CT claims, that number rises to 3%.
Associated medical-legal costs are up 14% per claim in 2025, while medical equipment and other medical services costs jumped 7% in the same period.
Claims adjusting costs
The high litigation rates for CT claims are seeping into the cost of adjusting claims, according to WCIRB. It projects that insurers’ loss adjustment expense ratio (the cost of adjusting claims) will increase to 37.7% of claims costs, up from 35.7% in the Sept. 1, 2025, filing.
The total cost of claims adjusting increased from $12,636 per claim in 2024 to $14,235 in 2025 and is expected to rise 5.5% annually between 2026 and 2028 to $16,184.
The takeaway
The Rating Bureau has sent the rate recommendation to the Department of Insurance, which will hold a public hearing in the coming months, after which the insurance commissioner, with input from the public and department actuaries, will either accept the recommendation or order a different rate.
While the workers’ comp market is expected to stay competitive, the rate recommendation could portend moderately increasing rates in the coming years.
Insurance Commissioner Approves Workers’ Comp Rate Increase
California Insurance Commissioner Ricardo Lara has ordered an 8.7% average advisory pure premium rate hike for policies incepting on or after Sept. 1, 2025.
The rate follows a substantial uptick in claims and claims adjustment costs over the past four years, resulting in a $1.3 billion underwriting loss for the industry in 2024, the first since 2014. However the market is still competitive and carriers and carriers may price their policies as they see fit.
The 8.7% increase is an average across nearly 500 class codes, and according to the Workers’ Compensation Insurance Rating Bureau (WCIRB), employers in several industries may see premiums begin to rise after hitting a 10-year low last year.
The pure premium rate is a benchmark insurers use to price policies. It only accounts for the cost of claims and adjusting those claims, not expenses such as office operations, personnel costs outside of claims representatives, marketing or other overhead.
What’s driving costs
The main drivers of the rate increase, according to the California Department of Insurance and the WCIRB — which had recommended an 11.2% hike — include:
Rising medical costs. The average medical cost per claim has been steadily climbing since 2016, and reached $36,488 in 2024, up 9% from $33,573 the year prior and 28% from $28,500 in 2016. These costs are for claims that include wage replacement payouts and medical costs, meaning the injured worker was unable to work for a period of time.
Rising costs for medical-legal reports. These are prepared by a qualified physician to assess an injured worker’s condition and its relationship to their workplace injury. This report is crucial for determining eligibility for benefits. As medical costs have increased, there has been a corresponding increase in requests for these reports, which adds to the cost of a claim.
Growing effects of cumulative trauma claims. These are injuries that develop over time, typically from repetitive motions. There is an entire industry in Southern California that helps injured workers file these types of claims, which are growing significantly in frequency. The WCIRB now estimates that over one-fifth of indemnity claims involve cumulative trauma.
Rising claims adjusting costs. The average cost of adjusting workers’ comp claims that include indemnity payouts rose to $12,600 in 2024 from $9,800 in 2021, an increase of 28%. The Rating Bureau projects it will reach $14,300 in 2027.
The effects
The premium an employer pays depends on their claims experience.
According to WCIRB, more than 280 classes are projected to face a higher-than-average pure premium increase next year. Conversely, some sectors will see lower pure premium hikes, while others may see decreases.
But thanks to a robust workers’ comp market, employers with strong safety records and low X-Mods are likely to continue receiving favorable pricing.