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SELECTED INDICATORS IN WORKERS’ COMPENSATION:   A REPORT CARD FOR CALIFORNIANS

Costs of Workers' Compensation in California

Costs Paid by Insured Employers

The cost of workers’ compensation insurance in California has undergone dramatic changes in the past ten years due to a combination of factors.

When the workers’ compensation insurance industry was deregulated beginning in 1995, insurers competed by lowering premium rates, in many instances lower than their actual costs. Many insurers drew on their reserves to make up the difference and several insurers went bankrupt.  Subsequently, the surviving insurers charged higher premium rates to meet costs and begin to replenish reserves.

The California workers’ compensation legislative reforms in the early 2000s, which were developed to control medical costs, update indemnity benefits and improve the assessment of permanent disability (PD), also had significant impact on insurance costs.

As intended by the most recent reforms, workers’ compensation costs in California have begun to decline.  The charts below illustrate the impact of those factors.

Workers’ Compensation Average Premium Rate

The following chart shows the average workers’ compensation premium rate per $100 of payroll. The average dropped during the early-to-mid 1990s, stabilized during the mid-to-late 1990s, and then rose significantly beginning in 2000 up to the second of half of 2003.  However, the average rate has dropped every year since that time.  In the first half of 2006, the average rate was lower than in 1993.

Workers Covered by Workers’ Compensation Insurance

The estimated number of California workers covered by workers’ compensation insurance grew by about 20 percent from 12.16 million in 1992 to 14.59 million in 2000.  From 2000 through 2004, the number of covered workers in California stabilized, averaging about 14.63 million per year.

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