Marsh and Oliver Wyman professionals presented findings from their "2024 Loss Cost Trends Report" for the restaurant industry in a recent Marsh webinar, with insights from a panel of experts including Kristi Whistle, restaurant segment leader, Marsh; Cindy Smail, food & beverage leader, Marsh Advisory; Dena Abdallah, client services team leader, Marsh Advisory; and Kim Marxkors, actuarial consulting, Oliver Wyman.
The fifth edition of the biennial report analyzed workers’ compensation and general liability claims data from 2019-2023, with participation from 60 restaurant companies representing over 40 brands across quick service, casual dining, and fine dining segments.
Key Findings
Key findings revealed a 4% year-over-year increase in workers’ compensation claim severity, alongside growing litigation rates, according to the panelists. The report highlighted slip, trip, and fall incidents as particularly costly claims.
“The cost of a slip, trip, and fall claim in workers’ comp is about 50 to 55% higher than the average workers’ comp claim,” explained Marxkors. “We have been seeing that average cost increased in the last two accident years relative to 2021 by approximately 20%.”
Social inflation is significantly impacting the industry. Abdallah noted, “What we've seen is that trial lawyer advertising just in this past year, in 2024 alone, is at $2.5 billion for 27 million legal services ads...more than twice the amount of dollars spent for pizza restaurant advertising.”
Strategies for Reducing Claims
According to the report, “holding location managers accountable for the impact of workers’ compensation and general liability claims through a formal cost allocation system contributes to lower losses,” with benefits including incentivizing loss control; reducing claim cost and severity; and transforming safety culture. The report also found that 90% of restaurant company respondents with a formal cost allocation system tend to have a lower percentage of large claims.
The report correlated risk management practices with outcomes, finding that comprehensive training programs and cost allocation strategies effectively reduced claims. According to Smail, “In-person training, ongoing training, and cost allocation can save 15 to 20%, which is significant when we're talking about the amount of money we’re talking about.”
Despite the benefits, however, “only 25% of survey respondents said their location managers are held accountable for the impact of workers’ compensation and general liability claims through a formal cost allocation system.” Some of the barriers keeping restaurant companies from implementing a formal cost allocation system include administrative burden, lack of awareness, and resistance to change, according to the report.
The panelists recommended implementing early intervention strategies, using data analytics to identify closure opportunities, and establishing effective cost allocation programs to combat rising claim costs in an increasingly challenging risk environment.