Commissioner Lara alerts state leaders to growing costs in California’s workers’ compensation system
News: 2025 Press Release
SACRAMENTO, Calif. – Insurance Commissioner Ricardo Lara today issued a letter to state leaders alerting them to growing costs in California’s workers’ compensation system, which can impact California businesses. This action follows the Commissioner’s adoption of a new Workers’ Compensation Insurance Claims Cost Benchmark and an Average Advisory Pure Premium Rate, which reflects an 8.7% increase over last year’s approved rate.
This year, there was consensus among actuarial experts that costs are rising and a meaningful increase in the average pure premium rate is justified and supported by the data. Experts on behalf of the California Department of Insurance, the Workers’ Compensation Insurance Rating Bureau (Bureau), and the Bureau’s public members differed only slightly on how much the rate should increase – a departure after more than a decade of steady or decreasing average advisory pure premium rates. The Department’s experts recommended an average advisory pure premium rate of $1.52 per $100 of payroll, which was adopted by Commissioner Lara. The adopted rate is advisory, meaning that insurance companies are not bound by it and are free to set their own rates. The new rate will be effective on September 1, 2025.
“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 Commissioner 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.”
Higher medical treatment and medical-legal costs, a greater number of projected cumulative trauma claims, and escalating costs associated with adjusting claims have all resulted in deteriorating accident year combined ratios, while at the same time, the rates charged by insurers have remained low. The Bureau’s projected combined ratio for accident year 2024 is estimated to be 123% -- the highest level in nearly 15 years -- and surpasses levels seen prior to the implementation of the SB 863 reforms that began in 2012.
“The Governor and Legislature acted over a decade ago to enact far-reaching reforms that have helped to reduce workers’ compensation rates,” wrote Commissioner Lara in his letter to Governor Newsom, Senate President Pro Tempore Mike McGuire, and Assembly Speaker Robert Rivas. “For the past decade, the pure premium rates adopted by myself and the previous insurance commissioner have shown continued progress toward reducing excessive costs in the system while protecting injured workers. Because higher insurance rates can affect businesses’ ability to hire and sustain financial growth, it is important to be aware of early warning signs and respond appropriately.”
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Media notes:
Led by Insurance Commissioner Ricardo Lara, the California Department of Insurance is the consumer protection agency for the nation's largest insurance marketplace and safeguards all of the state’s consumers by fairly regulating the insurance industry. Under the Commissioner’s direction, the Department uses its authority to protect Californians from insurance rates that are excessive, inadequate, or unfairly discriminatory, oversee insurer solvency to pay claims, set standards for agents and broker licensing, perform market conduct reviews of insurance companies, resolve consumer complaints, and investigate and prosecute insurance fraud. Consumers are urged to call 1-800-927-4357 with any questions or contact us at www.insurance.ca.gov via webform or online chat. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.
