California approves first workers’ comp rate increase since 2015
On July 15, 2025, California Insurance Commissioner Ricardo Lara approved an 8.7% increase to the state’s advisory pure premium rates—marking the first official hike since 2015.
While advisory rates are not binding, they play a major role in how carriers price workers’ compensation policies across California. The move reflects growing systemic pressures and signals a shift in how workplace risk is being evaluated and priced in one of the country’s most complex insurance environments.
What are advisory pure premium rates?
Issued by the Workers’ Compensation Insurance Rating Bureau of California (WCIRB), advisory rates:
· Represent expected claims costs per $100 of payroll
· Include medical, indemnity (lost wages), and legal costs
· Do not include carrier-specific expenses like administration or profit
· Serve as a pricing benchmark—not a requirement
These rates help carriers, brokers, and actuaries assess industry-level risk trends. And while insurers aren’t required to follow them, many adjust their pricing strategies based on these recommendations.
Source – Business Insurance
Why the increase?
The 8.7% hike reflects several growing risk drivers:
· Wage inflation in California, which increases claim value and indemnity exposure
· Medical cost escalation, particularly in complex injury categories
· Litigation trends and rising legal expenses
· Increased claims from cumulative trauma and delayed injury reporting
· Higher frequency of certain claim types—especially in manual labor and healthcare sectors
California Insurance Commissioner Ricardo Lara acknowledged the balancing act employers face, “Rising workers compensation costs threaten to put coverage out of reach for small businesses and employers who are already struggling to keep up,” Lara said in the official release.
The WCIRB’s data showed that recent years have reversed some of the downward pressure that kept rates flat or declining since 2015.
What does it mean for employers?
This rate approval doesn’t automatically raise every employer’s premium, but it does impact how insurers approach pricing and underwriting in California. Employers may see:
· Premium increases on renewal, especially in high-frequency or high-severity sectors
· More conservative underwriting from carriers—tightening terms or applying surcharges
· Greater scrutiny of classification codes, claims history, and lag times
· Less flexibility in markets already under strain (e.g., construction, transportation, staffing)
What employers can do?
Even in a hardening market, there are steps businesses can take to stay ahead of cost pressures:
1. Review Your Loss History
a. Ensure claims are accurately reported and coded
b. Identify lag-time issues and resolve open claims where possible
2. Invest in Safety & Return-to-Work Programs
a. Carriers look favorably on employers with documented safety training, modified duty programs, and incident protocols
3. Audit Your Class Codes
a. Misclassified payroll can lead to overcharges or unnecessary exposure
4. Engage Your Broker Early
a. Ask how the advisory rate increase may affect your renewal and what alternate options exist in the market
5. Track Regulatory Movement
a. California’s legal and regulatory environment evolves quickly—stay up to date on WCIRB filings, case law, and employer obligations
Final thought
After nearly a decade of rate stability, California’s decision to approve an advisory rate hike reflects the new cost realities of the state’s workers’ comp system. While not all employers will feel the impact equally, the message is clear: the cost of risk is rising, and staying ahead requires a proactive approach to claims, compliance, and carrier relationships.
