Signs of Future Increased Costs in Workers’ Compensation Continue
Author, Kevin Howard, Partner, Rancho Mesa Insurance Services, Inc.
Senator Anna M. Caballero recently introduced Senate Bill 555 (SB 555), also known as the Workers’ Disability Adjustment Act. While the bill is currently stalled in the Senate Appropriations Committee, SB 555 could, if signed into law, increase weekly Permanent Disability (PD) benefits for injured workers in the California workers’ compensation system, adjusting these annually to reflect economic inflation through a cost-of-living adjustment (COLA).
According to the official Senate Committee analysis, the projected cost of SB 555 is estimated at $570 million to $907 million over eight years. This potential increase in long-term claim cost could catch workers’ compensation underwriters and actuaries off guard. Exploring things further, we have provided an example below of an injured worker’s permanent disability benefits should SB 555 generate enough interest back in Sacramento.
Meet Joe the Roofer
If Joe is deemed 25% permanently disabled, here is how his PD benefits would look before and after SB 555. I am using a 5-year period in this claim scenario:
Before SB 555 (Current System)
Weekly Benefit: $290/week
Duration: 5 years
Total: $75,400
(Note: These rates have remained unchanged since 2014.)
After SB 555 (COLA)
Benefits increase annually with inflation (assume 3% COLA/year)
Estimated Total: $80,051
Bottom line: Over five years, Joe would receive 6–8% more in PD benefits under SB 555. These payments would reflect modern cost-of-living realities for injured workers.
Projecting these new claim costs could dramatically impact underwriting within the worker’s compensation marketplace. It would most certainly elevate premiums to levels not been seen in years. While it is clear this bill may continue to be stalled, we expect the push for higher permanent disability benefits to be a regular theme in this and other potential new legislation.
How to Prepare For the Hardening Workers’ Compensation Market
Work closely with your broker at your pre-renewal meeting to understand your company’s key performance indicators and how those can be leveraged for the best possible pricing outcome at renewal. Re-visit your safety program and protocol, focusing on lowering claim frequency and severity. And finally, understand how your broker is developing your risk profile to the underwriters. To learn more about how Rancho Mesa can help in these areas, contact me at khoward@ranchomesa.com or call me at (619) 438-6874.
About the Author
Kevin Howard is a Commercial Insurance Broker at Rancho Mesa Insurance Services, Inc., specializing in risk management and insurance solutions for artisan contractors including solar, roofing, and other skilled trades. Based in San Diego, California, Kevin serves contractors throughout the Southern California region, helping them protect their businesses with tailored coverage and proactive support. His clients benefit from access to exclusive tools like the SafetyOne™ Platform, RM365 HRAdvantage™ Portal, and workers’ compensation claims advocacy services, designed to improve safety, streamline HR processes, and support better claims outcomes.