Business owners in California – especially those in higher-risk industries like construction, manufacturing, and logistics – should be paying close attention to a big development in the insurance world. The Workers’ Compensation Insurance Rating Bureau (WCIRB) has recommended an 11.2% increase in the pure premium rates for workers’ compensation insurance, effective September 1, 2025.

For a construction company with $1M in annual payroll, this could mean an additional $15,000-20,000 or more in additional workers’ comp costs annually, depending on their industry classification and claims history.

This isn’t just a minor adjustment. It’s a market signal that after years of relatively stable or declining rates, the tide is beginning to turn.

Here’s what you need to know, why it matters to your business, and how MartinoWest can help protect you from rising costs.

Understanding the WCIRB’s 11.2% Rate Increase Recommendation

The WCIRB issued this proposed increase on April 30, 2025, and it would affect roughly 500 standard classification codes. While the recommendation is advisory (not mandatory), it serves as a key benchmark for insurers when they develop their own pricing.

In other words, while insurance companies are not required to follow this exact increase, many use it as a starting point – which means higher premiums could be on the way.

🔗 Read the full WCIRB press release

What Is the WCIRB and Why Does Their Recommendation Matter?

The WCIRB is the agency responsible for analyzing workers’ compensation data and making rate recommendations to the California Department of Insurance (DOI).

Their “pure premium” rates represent the baseline cost of coverage – excluding expenses like broker commissions, taxes, and other load factors. While the WCIRB doesn’t set final prices, its recommendations carry serious weight in the market.

California operates on a file-and-use system for workers’ comp, meaning carriers can file rate changes and start using them within 30 days unless challenged by the DOI. That flexibility can lead to fast shifts in pricing, and employers need to stay alert.

Why Are Rates Going Up?

The WCIRB’s recommendation is driven by several rising cost pressures:

1. Rising Medical and Litigation Costs

One of the biggest contributors to the proposed increase is the growing expense of both medical treatment and litigation. Claims from previous accident years – particularly 2023 and earlier – are costing more than expected due to higher medical service costs, expanded use of treatments like physical rehab and medical-legal evaluations, and increased litigation activity. Additionally, wage inflation has raised indemnity claim payouts, since these are directly tied to employee earnings. Together, these factors drove average medical costs per claim up approximately 9% in 2024, significantly impacting the overall cost of coverage.

2. Rising Frequency of Cumulative Trauma Claims

Cumulative trauma (CT) claims – those that result from repetitive stress or prolonged physical strain – are on the rise, particularly in labor-intensive sectors. These types of injuries are often more complex and difficult to resolve, leading to longer recovery times and higher claim costs. The WCIRB noted a 1.4% increase in indemnity claim frequency for 2024, a reversal from prior declines, which adds more pressure to the system.

3. Sharp Increases in Allocated Loss Adjustment Expenses (ALAE)

ALAE – costs associated with investigating, handling, and settling claims – have spiked significantly for three straight years, with annual increases exceeding 7%. This jump is tied to more serious injury types, increasing legal complexity, and a notable rise in statewide litigation. The WCIRB’s updated projections now reflect a 5.0% severity trend for ALAE, more than double the 2.0% figure from their previous filing.

What’s Changing – and What It Means for Employers

The WCIRB’s proposed rate increase may signal the end of California’s long-standing soft market, where workers’ comp rates have remained relatively low and insurers have competed aggressively for business. Now, the market appears to be firming up, and that shift could bring important changes for employers.

Here’s what to expect:

• Higher premiums – As carriers react to increased cost pressures and WCIRB recommendations, business owners may see notable increases in rates, especially if they’re insured through standard market carriers.
• Tighter underwriting requirements – With more scrutiny on risk, some businesses may find fewer options available, particularly if they have higher experience mods or operate in riskier industries.
• Greater focus on claim history and mod factors – Insurers are likely to weigh your past claims and current safety protocols more heavily when determining eligibility and pricing.

If your business falls under one of the 500+ classification codes included in the WCIRB’s proposed changes, you could face significant premium increases, regardless of your claims history. View the full rate filing here – see pages 21–22

This impact is especially relevant for:

• Businesses with high experience mods
• New ventures that lack an established claims history
• Employers in industries with rising cumulative trauma or serious injury claims

If your current broker isn’t preparing you for these shifts – or simply follows WCIRB recommendations without question – it could cost you more than it should.

The good news? You have options.

How MartinoWest Helps You Stay Ahead

At MartinoWest, we understand that a one-size-fits-all approach doesn’t work when it comes to workers’ compensation. That’s why we closely monitor market conditions, stay ahead of emerging trends, and evaluate specialty programs designed to help businesses mitigate rising workers’ comp premiums and claims costs.

These alternative programs offer more flexibility in underwriting, risk control, and pricing, allowing us to develop tailored solutions that align with your business’s unique risks and needs.

What does this mean for you?

• Competitive, adaptable pricing, even for high-mod businesses or those with a history of claims
• Integrated solutions that address HR, compliance, and payroll challenges alongside insurance
• Informed, proactive strategy – we look beyond surface-level data to fully understand and advocate for your business

What You Can Do Right Now

To stay ahead of rising costs and make smarter decisions about your coverage, we recommend:

1. Explore Alternative Programs

If you’re facing increasing premiums, alternative solutions such as specialty markets or PEOs may provide better pricing and more holistic support across operations. These programs can offer flexibility not found in traditional workers’ comp insurance.

2. Optimize Operational Strategy

Bundling insurance with services like HR support, compliance tools, and safety management can help reduce claims, improve workflows, and control long-term costs.

3. Implement or Strengthen Safety Programs

A well-run safety program isn’t just good for your people, it’s good for your bottom line. Proactive safety measures help reduce the frequency and severity of claims, improving your risk profile and overall costs.

Let’s Talk

If you’ve been operating with a “set it and forget it” mindset, now is the time to reevaluate.

Contact MartinoWest today to explore smarter options for your workers’ comp coverage and operational strategy. We’ll help you make informed decisions, uncover savings, and build a stronger foundation for your business in 2025 and beyond.