CDI's Lara warns of 'early warning signs' in California workers’ comp market

By Mia MacGregor

July 21 - (The Insurer) - California Insurance Commissioner Ricardo Lara has warned of rising costs in the state's workers' compensation system, prompting an 8.7% increase in the state insurance regulator's average advisory pure premium rate for the line.

The rate adjustment, effective September 1, 2025, follows expert consensus on escalating costs, marking a significant shift after over a decade of stable or decreasing rates.

Lara issued a letter to state leaders, including Governor Gavin Newsom, alerting them to the impact of rising costs on California businesses.

The new advisory rate is set at $1.52 per $100 of payroll. This rate is advisory, meaning insurers can set their own rates independently.

The rate increase reflects concerns over higher medical treatment and legal costs, projected cumulative trauma claims, and escalating claim adjustment expenses, contributing to deteriorating accident year combined ratios.

The Workers’ Compensation Insurance Rating Bureau projected the combined ratio for accident year 2024 at 123%, the highest in nearly 15 years and above pre-reform levels.

“We must be proactive in analyzing and addressing these early warning signs of a shift in market conditions in order to foster a vibrant and competitive insurance marketplace,” said Lara.

“Our workers’ compensation system is designed to help injured workers and keep costs down for employers. These considerations should guide us in striving for data-driven solutions.”