Rise in Calif. workers comp indemnity costs may be due to recession: Study

CAMBRIDGE, Mass.—The recent recession may have driven an increase in workers compensation indemnity costs in California, according to the Workers Compensation Research Institute.

Indemnity costs climbed an average of 7% per year between 2007 and 2009, despite little change in the average weekly wage of injured California workers during that time, the Cambridge, Mass.-based WCRI said in a report released Monday.

That increase is compared with a 30% decline in indemnity costs per claim in California from 2005 to 2007, the report said. The decline was attributed largely to workers comp reforms passed by California from 2002 to 2004.

The average duration of temporary disability claims increased by one week per year during the recession, which drove much of the recent increase in indemnity costs, WCRI said. Other factors included more injured workers who were out of work for more than one week.

WCRI said the data is possible evidence that the recession had an impact on workers comp costs.

"During a recession period, one would typically expect to see slower wage growth, slower return to work (because there are fewer jobs available due to higher unemployment rate), and more incentive to settle cases for both parties because of greater uncertainty regarding the future," the report said.