California is starting to look like the patient zero of a workers’ compensation pricing correction, with rates moving higher after years of declines while much of the country remains locked in intense competition for the line.
The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) estimated that average charged rates in the first quarter of 2026 were about 6% higher than in 2025, suggesting a decade-long downward trend may be ending. The state’s combined ratio also rose three points in 2025 to its highest level in more than 20 years as claim frequency and loss costs climbed. WCIRB projects the 2025 accident-year combined ratio at 127%, the second consecutive year above 120%.
In July, Insurance Commissioner Ricardo Lara adopted an average advisory pure premium rate of $1.65 per $100 of payroll for new and renewal policies incepting on or after September 1, a 6.6% increase from the 2025 approved rate. WCIRB had sought a larger 10.4% increase, citing higher cumulative trauma claim frequency, medical costs and allocated loss adjustment expenses. The rate is advisory: insurers are not bound by it and set their own rates.
That is a markedly different trajectory from the broader US market. NCCI put the 2025 accident-year combined ratio for private carriers at 102%, well below California’s projected result, though still above breakeven. NCCI chief actuary Donna Glenn has said California, which accounts for about 20% of the national workers’ comp market, is pushing countrywide accident-year results higher.
On a calendar-year basis, private carriers posted a 91% combined ratio in 2025, marking a 12th consecutive underwriting gain. But medical and indemnity severity each increased 4%, while lost-time claim frequency declined by just 2%, a slower drop than its longer-term trend.
That gap is beginning to raise a bigger question for brokers: how much longer can competition keep workers’ comp pricing down if underlying accident-year results continue to deteriorate?
“What that combined ratio that WCIRB publishes tells you is that the numbers aren’t where they need to be,” Mark Walls, corporate senior vice president and chief marketing officer at Safety National, told Insurance Business. “It tells you the rates are inadequate, which is why you’ve seen rates going up and even the California Department of Insurance recommending rate increases.”
The biggest differentiator in the state, according to Walls, is cumulative trauma (CT). CT claims made up a preliminary 26.6% of indemnity claims in 2024 and 31.6% in 2025, according to data WCIRB chief actuary Tony Milano presented at the bureau’s annual conference.
WCIRB has separately identified the sharp growth of CT claims as an increasingly important driver of California claim frequency, medical costs and allocated loss adjustment expenses. Its June report, Emerging Patterns of Cumulative Trauma Claims, found CT claims involve higher levels of litigation and earlier use of medical-legal and interpreter services than non-CT claims, with implications for pricing and reserving. CT claims now account for roughly a quarter of total pure premium costs, the report found.
Walls also pointed to California’s causation standards and the prevalence of post-termination claims as adding friction and cost to the system. He said many CT claims are litigated and argued that the threshold for establishing work-related aggravation is contributing to the increase.
He believes another historic buffer has now largely disappeared: favorable prior-year reserve development, which had supported California’s results, is largely gone. “These costs have been increasing for years,” said Walls. “It has just gotten dramatically worse because of the CT claims situation.”
Nationally, reserve releases are still helping. NCCI estimates the industry has a $14 billion redundant reserve position, down from $16 billion a year earlier, while prior years continue to experience downward development. That helps explain the 11-point gap between the 91% calendar-year combined ratio and the 102% result for accident year 2025.
The California market has not yet reached the point where carriers are broadly withdrawing. Walls noted that one historical warning sign of carrier retrenchment would be growing market share for the State Compensation Insurance Fund, something he has not yet seen.
Workers’ comp also remains comparatively attractive to insurers after years of strong profitability, and this appetite could slow the speed of any national correction even as loss trends weaken.
For now, Walls sees California and Nevada as the outliers experiencing corrections. Elsewhere, brokers are more likely to see shrinking decreases.
California employers are meanwhile pushing for legislative action on cumulative trauma. An employer-led coalition seeking tighter causation standards and restrictions around post-termination claims. Walls expects the issue to become more salient in the near future.
“These exposures just don’t exist anywhere else,” he said. “There should also be tighter thresholds around a post-termination CT claim because there are so many of those that just come out of the blue.
“This is something you’re going to see a lot of activity around over the next year or two in the California legislature.”
