The California Workers’ Compensation Institute released its annual analysis of private self-insured employer data in June 2026, covering calendar year 2025 experience with comparisons back to 2021. The headline looks favorable: claim frequency fell to 3.83 per 100 employees, a five-year low, and total claims dropped 2.7% to 84,996. But cost per claim tells a different story. Average incurred losses reached $11,520, up 7.7% from 2024 and 48.1% since 2022.
Who It Affects
Private self-insured employers in California across technology, healthcare, manufacturing, agriculture, and retail. The dataset covers 2.22 million employees (down 1.5% year over year) and $152.5 billion in wages (up 1.1%). Any self-insured employer using combined loss ratios or frequency-weighted projections to set WC reserves should test whether declining claim counts are masking a cost-per-claim problem in their own data.
The Severity Problem Behind the Frequency Headline
Total incurred losses rose 4.8% to $979.2 million even as claim counts fell. The math is direct: severity is climbing faster than frequency is dropping. Medical costs are the primary accelerant. Incurred medical losses per claim jumped 55.2% since 2022; paid medical per claim rose 48.4% over the same period. Total paid medical losses increased 20.9% since 2022 despite 18.5% fewer claims.
This pattern mirrors what CWCI found in California’s public self-insured sector earlier this year, where medical payments per claim rose 13.1% for the third consecutive year. The private sector’s three-year medical escalation is steeper.
Reserve Mechanism: Development Factor Lag
The core risk is in development factor selection. Loss development factors (LDFs) derived from 2021 and 2022 origin years were calibrated to an environment where incurred cost per claim was 48% lower. Applying those factors to 2024 and 2025 accident years, where severity per claim has stepped up materially, will likely produce ultimates that fall short of what these claims will actually cost.
The problem compounds for employers relying on a single blended loss ratio. When frequency falls 18.5% over three years while severity per claim rises 48.1%, a combined ratio looks stable. But the severity component is doing the heavy lifting, and it is concentrated in medical reserves where the tail is longest. Case reserves set at the historical average cost per claim are running below ultimate for open 2024 and 2025 claims. For more on diagnosing these shifts, see What’s Actually Driving Your IBNR Higher?
What This Means for Your Next Review
Ask your actuary three questions. First, are development factors from 2021 and 2022 origin years still appropriate given the 48% jump in incurred cost per claim? Second, should the projection split frequency and severity components rather than rely on a single combined loss ratio? Third, how does the 55.2% medical cost escalation since 2022 affect tail factor selection for open medical-only claims?
If you are benchmarking against statewide data, note that the 2.22 million covered employees in the CWCI dataset represent the largest private self-insured pool in any state. The severity trajectory here is a leading indicator for private self-insured employers nationally.