In May 2024, the Insurance Journal reported that the written workers’ compensation premiums were 2% higher in 2023 when compared to the previous year. The information comes from the final annual report from the Workers’ Compensation Insurance Rating Bureau of California (WCIRB California). Here, our Sacramento workers’ compensation defense lawyer highlights the key points to know about the rise in workers’ compensation costs in California.
Key Details from the California Workers’ Compensation Premium Report for 2023
WCIRB California’s 2023 report reveals a 2% increase in written premiums from the previous year. The rate increase reflects both significant economic growth rate reductions. Notably, despite a 2.6% drop in advisory pure premium rates as of September 1, 2023, a modest increase is proposed for 2024. The report notes a decrease in the loss ratio. The primary reason for that is higher payroll in California and a steady level of overall claims. WCIRB’s report highlights that there has been a diminishing number of COVID-19 claims. On the other hand, overall indemnity claim severity rose by around 3% in 2023—hitting the highest level in 10 years.
How are Workers’ Compensation Insurance Rates Determined in California?
Workers’ compensation premiums are a significant business expense for companies and organizations. They need to be considered as part of the annual budget for overhead costs. Here are some of the main factors that will impact how much a specific employer pays in workers’ compensation insurance premiums in California:
- Industry: The nature of the industry significantly influences workers’ compensation insurance rates. Industries are classified according to the level of risk associated with their operations. For instance, construction companies—which operate in an industry where physical labor is required, and machinery usage is present—generally face higher workers’ compensation rates due to the increased risk of injuries.
- Payroll: Payroll serves as a basis for premium calculations. The rationale is straightforward: the more employees an organization has, or the higher the total payroll, the greater the exposure to potential claims. Insurers use a rate per $100.00 of payroll to determine the premium. All California employers must accurately report their payroll costs.
- History: A company can impact its workers’ compensation rates. In California, an employer’s history of claims is a critical factor in setting premiums. Companies with a history of frequent or severe claims may face higher rates as they are seen as higher risk. Insurers consider both the frequency (number of claims) and severity (cost of claims) in their assessments.
Consult With Our Sacramento Workers’ Compensation Defense Law Firm Today
At Yrulegui & Roberts, our Sacramento workers’ compensation defense law firm is always prepared to put the best interests of our clients first. We represent employers and insurance companies. If you have any questions about workers’ compensation defense in California, please do not hesitate to contact us today. Our firm provides workers’ compensation defense services in Sacramento and communities beyond.
