Written premiums for workers’ compensation insurance in California have stabilized between 2022 and 2024 after experiencing significant fluctuations during the pandemic. However, a new report reveals that the combined ratio, a key measure of insurance profitability, has reached its highest level in 14 years.
The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) published its Quarterly Experience Report, which provides insights into the state’s insurance landscape as of December 31, 2024. According to the report, the average charged rate for workers’ compensation insurance in 2024 has increased by about 1% compared to 2023. This marks the first rise in rates after several years of declines.
The projected combined ratio for 2024 is now at 123%, up 9 points from the previous year and the highest it has been since 2010. This increase is largely attributed to rising medical costs, higher expenses related to claims processing, and an uptick in the frequency of indemnity claims. The WCIRB noted that combined ratios have remained above 110% for the last four years, a situation not seen since before the major reforms introduced by Senate Bill No. 863.
Rising costs in the workers’ compensation system have led the WCIRB to propose an 11.2% increase in the advisory pure premium rate, set to take effect on September 1, 2025. This proposal reflects ongoing concerns about the financial health of the system.
The report also highlights trends in indemnity claims. After a period of quicker settlements during the second quarter of 2020, the frequency of these claims has increased again, particularly due to a rise in cumulative trauma injury claims in 2022 and 2023. The WCIRB expects this trend to continue into 2024, with projected severity for indemnity claims expected to be 6% higher than in 2023 and 33% above 2016 levels. This projected severity is the highest it has been in over a decade, surpassing figures recorded before the SB 863 reforms.
As California navigates these challenges, stakeholders in the workers’ compensation system will be closely monitoring these developments, particularly as they impact both employers and employees in the state.