CA Insurance Commissioner Lara Approves 8.7% Workers Compensation Increase

Rancho Mesa’s Alyssa Burley and President David Garcia discuss California's approved 8.7% workers' compensation insurance rate increase, its impact on businesses, and practical steps business owners can take to prepare for the changes effective September 1st.

Alyssa Burley: You're listening to Rancho Mesa’s StudioOne™ podcast, where each week we break down complex insurance and safety topics to help your business thrive. I'm your host, Alyssa Burley, and I'm joined by Dave Garcia, president with Rancho Mesa. And we're going to talk about California's now approved workers' compensation insurance rate increase. Dave, welcome to the show.

Dave Garcia: Thanks, Alyssa, glad to be back here in StudioOne and anxious to get this information out there for everybody.

AB: Yeah. So we've actually been talking about the proposed workers' compensation increase for, I don't know, the last few months. And we've published multiple articles and podcast episodes on the subject, and now it's actually official. California's Insurance Commissioner, Ricardo Lara, has approved an 8.7% average rate increase.

So Dave, in your opinion, what kind of impact will this increase have on California businesses?

DG: Well, you know, this is a deep, deep topic. So I'll try to be brief right now. So in short, you know, we've obviously been talking a lot about this recently, and particularly about what's driving these increases. But rather than go over all those elements again, I'd encourage the audience to listen to the three-part series I did recently with Margaret Hartman. She's the Senior Vice President and Chief Marketing Officer for Berkshire Hathaway Homestate Companies. They're one of the largest specialty work comp carriers in California and Margaret gave just tremendous insightful overviews of what's at the heart of this and the increases range from medical cost inflation, payroll inflation, and cumulative trauma claims just to name a few of the many cost drivers.

So to fix those, we're definitely going to need reform, but as with anything else, to address those bigger problems that are going to require that type of reform, I just don't see that coming until 2027 at the earliest. Maybe election year 2026, puts a little upward pressure there, but I'm not going to bank on anything happening before 2027.

So with Laura's decision, the WCIRB just recently released their new pure premium rates per class code, which we take the opportunity then to download that into our pricing models here at Rancho Mesa. So that gives us an ability to identify the individual impacts these new pure premium rates will have on each class code.

AB: Okay, and we'll include links to those three episodes with Margaret in the episode notes for this episode. And I would encourage our listeners to reach out and see if this increase or how this increase is going to impact your individual class code.

Now, when can California business owners expect to feel the result of this increase?

DG: That's a great question, Alyssa. So this all goes into effect September the first of this year. So these pricing changes will take effect on that day. But the thing that business owners should understand is that those changes will not take effect for them until the actual renewal time of their workers' compensation policy.

AB: All right. So businesses with a renewal date on or after September 1st will feel this change. While someone who renews, let's say in February, won't feel this impact until February 2026, correct?

DG: Yeah, exactly. You’re spot on there. And that's why I think we've tried to kind of be the canary in the mine here by publishing so many articles and podcasts months ago to try to get this message out because, so many of the businesses that--so for those business that renew really close to September they have some opportunity to get prepared the time is short.

AB: All right so there are things business owners can do to prepare even if they renew early September, maybe October?

DG: Yes, there's ways to prepare now and that's whether your renewal is in September or some month after September. But let me just stress this, time is of the essence. There is no time to delay. So the closer you are to September 1st in your renewal, you really have no time to spare.

So along those lines, we've got solutions here that we think will help all businesses. So we're going to be taping an episode here in the next few days that will spell out exactly what businesses can do now to try to mitigate these increases. The good news is we have the answers and on top of that we're more than willing to roll up our sleeves and get to work.

AB: If you're talking to your client today we know the time is over the essence what are you telling them?

DG: You know I'm telling them that the first thing they need to do is understand what the actual individual increase is to them and their pure premium rates. So they need to reach out to the broker, hopefully they're aware of what those changes are, and find out is it a single digit, double digit, high double digit increase, it's going to really make a big difference.

The second thing they really need to do is kind of roll up their sleeves and have somebody audit their safety program.

And then thirdly, I think it's time to really mine into your claims and try to develop solutions to the root causes of those claims. Without those three things, the wave's going to hit you and you're not going to see it coming.

So we all need to just encourage one another, now's the time to be proactive. And this is work that is able to be done. This is not overwhelming work. It's a matter of being proactive, understanding the situation, and then implementing a strategy and moving forward.

So businesses that are out there, reach out to your broker, reach out to us, talk to somebody now, don't wait.

AB: All right, and I look forward to discussing all of those ways California businesses can prepare now for the coming increases. So Dave, thank you for joining me in StudioOne.

DG: Alyssa, thank you so much, an audience out there. Really, time is of the essence. So make those calls.

AB: All right. Well, thanks for tuning in to our latest episode produced by StudioOne. If you enjoyed what you heard, please share this episode and subscribe. For more insights like this, visit us at RanchoMesa.com and subscribe to our weekly newsletter.