California Insurance Commissioner Approves 6.6% Workers' Compensation Rate Increase
Earlier this year, the WCIRB actuaries advised California Insurance Commissioner Ricardo Lara of the need to increase workers' compensation rates by 10.4%. A second actuarial firm, using different methodologies, found the rate increase needed to be only 4.8%. Commissioner Lara factored in both actuarial recommendations when approving a 6.6% increase. Based on current performance trends in California, one could anticipate further rate increases and a hardening of the market, much due to the significant increase in the frequency and severity of cumulative trauma claims.
On July 10, 2026, Commissioner Lara issued his decision, approving advisory pure premium rates of $1.65 per $100 of payroll for policies incepting on or after September 1, 2026, a 6.6% increase over the September 1, 2025, approved rates. The WCIRB had recommended $1.71 per $100 of payroll, which would have represented a 10.4% increase. The second actuarial opinion, from Bickmore Actuarial representing public members, supported a lower increase of approximately 4.8%. Commissioner Lara's 6.6% decision landed between the two recommendations, a measured but meaningful move in a market that has now seen two consecutive years of rate increases after more than a decade of steady declines.
THE CONTEXT BEHIND THE DECISION
To understand why this decision matters, it is worth stepping back through the recent history of California workers' compensation rates.
For more than a decade, California employers benefited from consistent rate reductions. The reforms introduced by SB 863 in 2012 drove significant cost improvements, and advisory pure premium rates fell steadily year after year. As recently as 2024, California employers were operating in a rate environment that was more than 44% below the state's previous high.
That trajectory reversed in 2025. Commissioner Lara approved an 8.7% rate increase for September 1, 2025, the first increase in a decade after the WCIRB originally proposed 11.2% and public members' actuary Nina Gau of Bickmore recommended 8.1%. The Commissioner's 2025 decision followed the lower end of the range. His 2026 decision follows a similar pattern, landing below the WCIRB's recommendation while acknowledging the underlying cost trends that justify a meaningful increase.
The cumulative effect is significant. Two consecutive years of approved rate increases - 8.7% in 2025 and 6.6% in 2026 represent a fundamental shift in the California market after years of favorable conditions for employers and their insurers.
WHAT IS DRIVING THE INCREASES
The cost pressures behind these rate increases are well documented. Commissioner Lara's own letter to state leaders following the 2025 decision identified three primary drivers: higher medical treatment costs, higher medical-legal costs, and a greater number of projected cumulative trauma claims.
Each of those drivers has continued to intensify heading into 2026.
Cumulative trauma claims now represent more than 25% of all indemnity claims statewide, a figure that has grown steadily since 2008 and accelerated sharply in recent years. In the Los Angeles Basin and Inland Empire, CT claims account for nearly half of all litigated claims. These claims are more expensive, more litigated, and harder to resolve than standard lost-time claims, and they show no sign of reversing.
Medical-legal costs and interpreter costs continue to rise, adding frictional expenses to an already stressed system. Allocated Loss Adjustment Expenses are now running at approximately $16,000 per lost-time claim, a nearly 50% increase from five years ago.
The WCIRB's projected combined ratio for accident year 2024 reached 123%, the highest level in nearly 15 years, surpassing levels seen before the SB 863 reforms. For the 2025 accident year, early indications suggest the deterioration has continued.
LOOKING AHEAD
Commissioner Lara's 6.6% approval for September 1, 2026, reflects a market in transition, one where the favorable conditions of the past decade have given way to a cost environment that is materially more challenging, and where the structural issues driving that cost environment are unlikely to resolve quickly.
The WCIRB's recommendation of 10.4% was not accepted in full, but the fact that it was filed at that level, following an 8.7% approval the prior year tells the more important story. The actuarial assessment of where California workers' compensation costs are heading is not a cautionary projection. It is a data-backed observation of trends already underway.
For PEOs, the question is no longer whether California is hardening. It is whether the data, disciplines, and carrier relationships are in place to navigate what comes next.