Ep. 615 CA Workers’ Compensation Market Faces Increased Pressure Beneath Stable Surface

Rancho Mesa’s Alyssa Burley sits down with Jeremy Hoolihan, Partner with the Janitorial Group to discuss the state of California’s workers’ compensation marketplace.

Show Notes: ⁠⁠Subscribe to Rancho Mesa's Newsletter⁠⁠.

Host: ⁠⁠⁠⁠Alyssa Burley⁠⁠

Guest: ⁠⁠Jeremy Hoolihan⁠⁠

Editor: Jadyn Brandt

Music: "Home" by JHS Pedals, “Breaking News Intro” by nem0production

© Copyright 2026. Rancho Mesa Insurance Services, Inc. All rights reserved.

Transcript

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 Jeremy Hoolihan, Partner with Rancho Mesa. Today, we’re going to talk about the state of California’s workers’ compensation marketplace.

Jeremy, welcome to the show.

Jeremy Hoolihan: Hi, Alyssa. It's great to be here at StudioOne.

AB: Well, we're glad that you're here.

JH: Thank you.

AB: So, you recently wrote an article about the California workers’ compensation market and how it may not be as stable as it appears. You suggest there are deeper issues. What are the key warning signs beneath the surface that leads you to believe there is some instability?

JH: Yeah, it's interesting because, you know, like you said, on the surface everything looks relatively stable. Premiums are flat. Rates are still near historic lows. But when you dig a little deeper, there are some real warning signs.

First, profitability has been under pressure. Combined ratios have been over 110% for the last five years straight, which means insurers are paying out significantly more than they're bringing in. And just for those that don't know, combined ratio is essentially money collected from the insurance company in the form of premium versus money that goes out in claims, overhead, expenses. So you can understand that for every dollar that they're collecting, on average over the last five years, they've paid out $1.10. So while they're making money investing those premium dollars, it's just really not something that's sustainable.

At the same time, we're seeing claim frequency tick up again and costs are rising across the board, you know, from medical costs, legal expenses, and overall claims handling costs. And, you know, on top of that, claims are taking longer to resolve, which adds even more pressure. So when we put that all together, the market looks stable, but underneath there's a lot of strain building.

AB:  Okay. So you highlight cumulative trauma claims as a major driver of current challenges. So will you explain why these claims are increasing and how they’re impacting insurers and employers?

JH: Absolutely. So, you know, cumulative trauma claims or CT claims have really become a major factor over the last couple of years. Since 2022, we've seen an increase in indemnity claim frequency, and a big piece of that is coming from CT claims. And just to define CT claims, these are injuries that develop over time. Things like repetitive stress or wear and tear. So they're very different from a single identifiable accident.

The challenge is that these tend to be much more complex. They're more likely to involve litigation. They take longer to resolve. And they drive up both legal and administrative costs. And oftentimes, these are post-termination or post-employment type claims. So they oftentimes come out of nowhere. for the employer as well as the insurance companies. For insurers, that means higher costs and more uncertainty. And for employers, it often means longer claims, higher premiums over time, and more difficulty managing their overall risk. So even if the initial injury doesn't seem severe, these claims can become very expensive and hard and over time develop.

AB: All right. So with combined ratios rising and potential rate increases on the horizon, what changes from insurers, employers, and legislators do you believe are most critical to stabilizing the system moving forward?

JH: Yeah, I think it's going to take a combined effort from all three, to be honest. From the insurance side, we're likely going to see a stronger focus on rate adequacy, meaning rates going up. Rates have been declining for years, and we're probably at a point where pricing has to adjust to reflect the true cost of the system. We're seeing that in the recent recommendation from the WCIRB. They recommended a 10.4% increase. That still is in review by the insurance commissioner, Lara. So we'll see what ultimately his recommendation is. But this is the second year in a row where we've seen a recommended rate increase. So you can see that we're kind of at a flux right now where something's going to happen.

For employers, it's really about being proactive, investing in safety programs, early reporting. and having a strong return to work strategy to help control the claim costs and the duration. And also, I would also recommend just good documentation from if someone's being terminated or let go, just documenting that, getting a letter of resignation, things of that nature.

And then from a legislative standpoint, I think there needs to be real focus on cumulative trauma reform. These claims are a big driver. of what we're seeing right now. And without some changes to improve on how they're handled, the system's going to continue to feel pressure. So right now, the insurance carriers and employers are handcuffed with regards to cumulative trauma claims because the injured worker and their attorney only has to prove that 1% of that injury was caused by. So you can find 1% of basically anything. So, you know, some strong reform would help the cause significantly. And, you know, Rancho Mesa has really been on the forefront in pushing for legislative reform. We've reached out to our state representatives, and we've also created form letters for our employers and our clients to sign to send to the state legislators as well. you know, hopefully that pressure will develop into some reform. And, you know, so overall it's pricing, better claims management, legislative reform, all working together to really stabilize things, you know, in the long run.

AB: Yeah, I agree. I think it's not that we don't want injured workers to get the care that they deserve, that they need. We just want to make sure that the system is fair. and that the claims that are being filed are legitimate, right? And so I think that all three of those entities working together on the system, we can see some reform.

So Jeremy, if listeners have questions about their workers’ compensation insurance, what’s the best way to get in touch with you?

JH: Yeah, I'm always happy to connect. You can reach me directly at (619) 937-0174 or by email at jhoolihan@ranchomesa.com

AB: All right, well Jeremy, thanks for joining me in StudioOne™.

JH: Thanks for having me Alyssa I really appreciate it.

AB: 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.