Workers' Compensation Costs at an All-Time High

From the Desk Of:

Scott M. Tilley, Esq.

President, Managing Attorney

Certified Specialist Workers' Compensation Law

The State Bar of California Board of Legal Specialization

WCIRB Says 2025 Comp Costs Hit a 127% Combined Ratio. That's the

Worst in Two Decades.

For every dollar California carriers collected in workers' comp premium in 2025, they paid out $1.27 in losses and expenses. That gap is now in its second straight year above 120%, and it's a direct preview of how hard claims will be fought and how tight reserves will run in 2026.

WCIRB released its 2026 State of the California Workers' Compensation Insurance System report on August 17, 2026. The headline number is the accident year 2025 combined ratio: 127%, up three points from 2024, and the highest in more than twenty years.

Rates are low. Losses are not.

Here's the part that should catch your attention. Average charged rates hit their lowest point in more than 50 years during 2025. Rates have been falling for a decade while medical costs, allocated loss adjustment expenses, and claim frequency kept climbing underneath them. That gap is exactly why the combined ratio blew past 120% two years running, and why the Insurance Commissioner approved a 6.6% advisory pure premium rate increase effective September 1, 2026. Written premium barely moved from 2022 through 2025, and Q1 2026 volume was only about 3% above Q1 2025. The market isn't pricing its way out of this yet.

Cumulative trauma claims are named as the primary driver

WCIRB didn't bury the lead on causation. The report states plainly that the share of indemnity claims involving cumulative trauma injury has increased significantly over the past four years and is the primary driver of frequency increases statewide. That lines up with CWCI's own data from earlier this month showing CT claims nearly doubled as a share of all California claims since 2018. Two independent data sources are now pointing at the same problem from different angles, which means this isn't noise. It's the number one line item pushing your loss ratio in the wrong direction.

What this means for claims handling, not just underwriting

A 127% combined ratio isn't an actuary's problem to solve alone. It's built claim by claim, and CT claims are where the erosion is concentrated. Every CT file that goes uninvestigated in the first 30 days, every apportionment argument left on the table, every claim that settles instead of getting a real causation fight, adds to next year's number. Carriers and TPAs that tighten CT claims handling now will show up favorably in next year's WCIRB data. The ones that don't will be explaining a repeat of this report to their reinsurers.

What to do about it now

Pull your own 2025 loss ratio and compare it to the 127% statewide figure. If you're running hotter, find out why, and check whether CT claims are the reason before you assume it's something else. Push claims teams to treat every CT allegation as a causation case from intake, not after the QME report comes back. And build the September 1 rate increase into your renewal conversations now, framed around these same cost drivers, so employers understand this is a system-wide trend and not just their bad year.

Law Offices of Parker & Irwin

This post is for general information only and is not legal advice.