8 Reasons Behind California’s High Workers’ Compensation Premiums

The Golden State features some of the US’s highest workers’ compensation premiums, currently preceded only by New Jersey and Hawaii. Although it might seem counterintuitive, this is a reason for concern for both employers and employees.

Businesses grapple with soaring expenses, which impacts their profitability and potential for growth. In turn, they’re forced to explore different cost-cutting measures, which is a strategy that often comes at the expense of employees’ benefits. 

As such, both sides should aim to gain a deeper insight into the factors that impact premiums. While this guide will give you an excellent overview of the issue, it is highly recommended to turn to Ontario, CA workers comp attorneys for a more comprehensive breakdown.

Why are California’s work comp premiums among the highest in the US?

Most believe that the recent COVID-19 pandemic is the main culprit behind soaring insurance costs. While there is some truth to that, it is not the whole truth. Extreme premium amounts can be attributed to a combination of numerous elements, ranging from a competitive market to some state-specific factors.

Ontario CA workers comp attorneys

Legal Framework and Regulations

California has some of the most worker-friendly laws in the country, which can result in higher costs for employers. Some key factors include:

  • Medical Treatment: California law ensures injured workers receive comprehensive medical care, including treatments for a wide range of injuries and illnesses. This can lead to higher medical expenses compared to states with more restrictive medical coverage.
  • Permanent Disability Benefits: California provides relatively generous permanent disability benefits, meaning workers who suffer long-term or permanent impairments receive substantial compensation.
  • Rehabilitation Services: The state offers comprehensive vocational rehabilitation services to help injured workers return to employment, increasing overall costs.
  • Legal ProtectionsCalifornia’s legal system is known for being pro-worker, and this can result in higher settlements and legal expenses for employers.
  • Labor Code §4662: This section of the California Labor Code presumes certain injuries to be work-related, which can make it easier for employees to claim worker’s compensation benefits.

High Cost of Living

The Golden State is known for its high cost of living, which directly impacts worker’s compensation premiums. Higher living costs mean higher wages, which are used to calculate premium rates. Employers must pay more in premiums to cover workers’ potentially higher salaries in California compared to states with lower living costs.

Occupational Mix

The types of industries prevalent in a state can significantly impact worker’s compensation premiums. California has a diverse economy that includes high-risk industries such as construction, agriculture, and entertainment, where workplace injuries are more common and severe. These industries contribute to higher premium rates due to the greater likelihood of claims.

Large Workforce

California’s large population and workforce mean more workers are covered under the state’s worker’s compensation system. This scale can result in increased administrative costs and, consequently, higher premiums.

Insurance Market Competition

The level of competition among insurance carriers can influence premium rates. In states with limited competition, insurers may have more pricing power, leading to higher premiums. California has a relatively competitive insurance market, but the combination of regulatory factors and high costs can still push premiums higher.

State Fund

California operates a state-managed worker’s compensation insurance fund known as the State Compensation Insurance Fund (SCIF). While it can provide an alternative for employers, it can also contribute to higher overall premiums, as it competes with private insurers in the market.

Litigation Costs

California’s legal climate can lead to increased litigation costs for employers. The state’s worker-friendly laws and the potential for disputes over injuries and benefits can result in higher legal expenses, which are factored into premium rates.

Unique Factors

California also has some unique factors that influence worker’s compensation premiums:

  • Earthquake Risk: The state’s susceptibility to earthquakes can lead to higher premiums for businesses, especially in industries where earthquake risk is a concern.
  • Wildfires: California’s vulnerability to wildfires can affect insurance costs, including worker’s compensation premiums, for businesses in fire-prone areas.
Why are California’s work comp premiums among the highest in the US

Comparison to the Least Expensive States

Now, let’s compare California’s worker’s comp premiums to those in the least expensive states. Keep in mind that these rankings can change over time due to various factors, so it’s essential to consider the current landscape.

North Dakota

North Dakota is often considered one of the least expensive states for worker’s compensation premiums. Several factors contribute to its low premiums:

  • Low Population Density: With a sparse population, there are fewer workers covered by the system, reducing administrative costs.
  • Economically Stable Industries: The state’s economy is heavily reliant on industries like agriculture and energy, which tend to have lower worker injury rates.
  • Competitive Insurance Market: The state has a competitive insurance market, which can help keep premiums affordable for employers.
  • Proactive Safety Measures: Employers in North Dakota often prioritize safety measures to prevent workplace injuries, leading to fewer claims.


Indiana is another state known for its relatively low worker’s compensation premiums:

  • Industrial Mix: Indiana’s economy includes a mix of manufacturing, agriculture, and service industries, which typically have lower injury rates compared to high-risk sectors.
  • Regulatory Environment: The state has a regulatory environment that is seen as more employer-friendly, which can result in lower overall costs.
  • Competitive Market: Indiana has a competitive worker’s compensation insurance market, providing options for employers to find affordable coverage.
  • Low Cost of Living: The state’s lower cost of living results in lower wage replacement costs, contributing to lower premiums.


Arkansas is often cited as having relatively low worker’s compensation premiums due to:

  • Economically Diverse Industries: The state has a mix of industries, including manufacturing, healthcare, and retail, which may have lower injury rates.
  • Regulatory Framework: Arkansas has a regulatory framework that balances worker protections with employer interests, which can help control costs.
  • Moderate Wage Levels: Lower average wages in Arkansas lead to lower premium rates compared to high-wage states.
  • Competitive Insurance Market: Competition among insurance carriers can help keep premiums affordable.

West Virginia

Although not the least expensive, West Virginia is still relatively affordable for worker’s compensation premiums:

  • Mining and Manufacturing: While the state has a significant mining and manufacturing sector, which can be risky, safety measures and industry-specific regulations help control costs.
  • State Fund: West Virginia operates a state fund, which provides an option for employers seeking more affordable coverage.
  • Regulatory Environment: The state’s regulatory environment is seen as a balance between worker protection and cost control.


Mississippi is another state with relatively low worker’s compensation premiums:

  • Economically Diverse: The state’s economy encompasses agriculture, manufacturing, and healthcare, with lower overall injury rates.
  • Regulatory Climate: Mississippi’s regulatory framework aims to balance worker protections and cost control, resulting in reasonable premiums.
  • Competitive Market: A competitive insurance market provides options for employers seeking affordable coverage.

Who are the leading Ontario, CA workers comp attorneys near me?

With 20+ years on the Ontario scene and 50+ years of collective experience, California Workers Compensation Lawyers are your top choice. Our accomplished team provides personalized guidance throughout your claims process and assertive representation in and out of the courtroom. Contact us today to schedule an appointment at our offices near George Gibbs Park, and let us fight for your law-given rights!