May 15, 2025 | MedLegalNews.com — California’s Workers’ Compensation Insurance Rating Bureau (WCIRB) is forecasting the state’s highest combined ratio in over a decade, raising concerns about the financial health of the workers’ compensation system.
In a recent update, WCIRB projected a combined ratio of 116% for 2024, marking the worst performance in 14 years. A combined ratio above 100% means carriers are paying out more in losses and expenses than they collect in premiums, which could signal future premium increases or market adjustments.
What’s Driving the High Ratio?
Several key factors are contributing to the spike:
- Medical inflation and rising treatment costs
- Increased indemnity payments driven by wage growth
- Legal system friction, including a rise in cumulative trauma claims
- Higher-than-expected claim frequency in certain sectors
The WCIRB also noted that allocated loss adjustment expenses (ALAE) — the costs insurers incur to settle claims — continue to climb and now account for a growing share of total expenditures.
Implications for Employers and Insurers
For employers, the rising ratio suggests potential premium hikes on the horizon, especially if loss trends continue. Carriers may tighten underwriting or increase reserves to offset projected losses.
Insurers operating in California’s workers’ compensation market may also face closer regulatory scrutiny. The California Department of Insurance (CDI) is expected to review these developments carefully in its upcoming rate hearings.
Policy and Legislative Outlook
The worsening ratio may add urgency to legislative reforms or administrative action. Lawmakers and regulators are closely monitoring system costs, particularly those associated with frictional legal expenses and fraud-related losses.
Meanwhile, WCIRB continues to emphasize data transparency and actuarial accuracy, offering regular updates to help stakeholders navigate these challenges.
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