California’s workers’ compensation insurers are on track for their worst underwriting year in more than two decades. The projected combined ratio for accident year 2025 now stands at 127%, meaning insurers are expected to pay out about $1.27 in losses and expenses for every premium dollar earned, according to the Workers’ Compensation Insurance Rating Bureau of California’s (WCIRB) Quarterly Experience Report, valued as of June 30, 2026, and released October 8, 2026.

The WCIRB says the 2025 figure is the second straight year above 120% (accident year 2024 came in at 125%) and the fifth consecutive year above 110%. The bureau notes that the last multi-year stretch with combined ratios above 100% came before the Senate Bill 863 reforms of 2012. By comparison, the ratio bottomed out at 78% in accident year 2016.

The report repeatedly points to cumulative trauma (CT) claims as a principal driver of the deterioration. Citing its June 2026 study, Emerging Patterns of Cumulative Trauma Claims, the WCIRB says CT claims grew from roughly 18% of indemnity claims in 2022 to more than 25%, with the increase concentrated in litigated claims, claims filed after termination, and claims showing little early medical treatment. Indemnity claim frequency rose 7.6% and 8.3% in the two accident-year periods following 2022, slowed to 0.7%, and then climbed another 3.6% in the first half of 2026. Excluding CT claims, the bureau describes recent frequency changes as more modest.

The projected loss and allocated loss adjustment expense (ALAE) ratio for accident year 2025 is 95%, essentially flat with 94% for 2024 but well above the 53% low recorded in 2016. The WCIRB attributes the climb mainly to higher average medical costs, higher ALAE, and rising claim frequency, particularly among CT claims.

Average ALAE per indemnity claim (excluding medical cost containment program costs) jumped 11% to $13,860 for accident year 2025, the fourth straight annual increase, based on data valued as of December 31, 2025. The bureau links the growth partly to CT claims, which are frequently litigated, and to a growing number of injured workers outside Los Angeles being represented by Los Angeles-based law firms.

Medical-legal costs are rising even faster. Indexed to 2014, average medical-legal costs per claim reached 170 in service year 2025, up from 121 in 2022, driven by both greater utilization and higher average payments per service, especially for medical record review. The WCIRB says CT claims use more medical-legal services, including psychological and psychiatric evaluations, and that the increases have been sharper in Southern California. Overall medical paid per claim rose 5% in the most recent service year, following a 10% gain the year before, with average paid per transaction up 4% and transactions per claim up 1%.

Other severity measures were flatter. Projected total loss and ALAE severity for 2025 is $81,460, nearly identical to 2024 and more than 30% above 2016. Indemnity severity slipped slightly to $30,611 but remains 29% above 2016, a rise the bureau ties largely to wage inflation. Medical severity per indemnity claim fell 3% to $34,560. The WCIRB cautions that these recent figures may understate eventual costs: CT claims tend to develop slowly, and roughly a quarter show no medical payments at 18 months.

Only 32% of open indemnity claims closed within the following year for the period ending June 30, 2026, down from a peak of 38% in 2019. The bureau says the decline since 2023 likely reflects more CT claims, heavier use of medical-legal services, and increased litigation, all of which can drag out the claims process.

On the revenue side, statewide written premium has held at roughly $15.7 billion to $15.9 billion annually since 2022. Premium written in the first half of 2026 totaled $8.6 billion, 5% ahead of the same period in 2025, which the WCIRB says points to growth for the full year. The industry average charged rate fell for more than a decade to a low of $1.63 per $100 of payroll in 2025; the preliminary estimate for the first half of 2026 is $1.64, suggesting the long decline may be ending. The report notes that the Insurance Commissioner approved average advisory pure premium rate increases of 8.7% effective September 1, 2025, and 6.6% effective September 1, 2026.

Finally, the WCIRB’s projected ultimate losses remain below what insurers have reported, but the gap has narrowed sharply, from about $16 billion in evaluation years 2017 and 2018 to roughly $2 billion for 2025. The bureau stresses that this comparison does not, by itself, indicate whether insurer reserves are adequate.

The WCIRB flags several limitations. The figures reflect insured employers only and may not represent the experience of self-insured employers. Results are statewide aggregates; individual insurers can differ significantly. Many figures are projections based on data as of June 30, 2026 (some exhibits use December 31, 2025, or June 7, 2026, data), and some rely on partial-period or preliminary data that may change as information matures. COVID-19 claims are included in some exhibits and excluded from others to preserve comparability with pre-pandemic years.