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Restaurant Industry Set to Confront Workers' Comp Challenge with New Food and Beverage Insurance Rating Classification
By Jorge Alexandria - June 28, 2024

I sat in on an in-person Workers' Compensation Insurance Rating Bureau (WCIRB) seminar that covered a significant update to the classification system for the California food and beverage industry that will take effect on September 1, 2024. Currently there is just one class code, 9079 (1), for the entire restaurant and hospitality sectors. This update introduces six new classifications that purportedly better reflect the diverse operations and risk profiles across the industry.

In usual form from the WCIRB, the seminar had three great presenters with outstanding graphics. (Insiders' tip: the WCIRB website remains one of the best for workers' comp explanatory definitions and videos). But what does the WCIRB do and why?

Established in 1915 as a private, non-profit organization, but now a quasi-government agency, the WCIRB's primary purpose is to gather and analyze data to develop accurate and objective recommendations for workers' compensation rates. It does so by issuance of Experience Modification Factors (X-Mods) to California employers by meticulously reviewing UNIT STAT claim information and policy data received from insurance carriers to calculate the X-Mods. This ensures that insurance rates are set accurately, preventing excessive premiums for employers while maintaining fair compensation benefits for employees. The WCIRB is very similar to NCCI.

However, the role of the WCIRB goes beyond rate-setting. The organization also plays a critical role in classigying businesses based on their operations and risks. This classification process helps insurance companies accurately assess the level of risk associated with different types of businesses, allowing for appropriate insurance coverage. After a multi-year study, regarding the Food and Beverage industry, the WCIRB will replace classificaiton 9079 starting September 1, 2024. Policies that start on or after this date will use the following new codes:


* 9058, Hotels, Motels or Short-Term Residential Housing - food or beverage employees
* 9080, Restaurants - full services
* 9081(1), Restaurants - N.O.C. (Not Otherwise Classified)
* 9082, Caterers, not restaurants
* 9083, Restaurants - fast food or fast casual
* 9084, Bars or Taverns - not restaurants

Will this change result in higher premiums?

Initially, no.

The six new classifications will all share a single advisory pure premium rate. However, once the WCIRB determines that there is enough payroll and loss data to evaluate the differences between these types of businesses, different advisory pure premium rates will be established. This means that our client base of restaurants will not see any changes to their experience ratings when the new codes go into effect, but changes may lie ahead in the not-too-distance future.

Also (eventually), some classes may rate higher on the risk scale than others due to their inherent nature of risk. For example, food trusk and catering rates will likely go up due to the driving exposure that a fine dining establishment does not have. Likewise, taverns, with a rough and tumble clientele may experience more of their bartenders/servers being punched in the face than one in a hotel bar. And that is exactly the tailored approach to workers' compensation the WCIRB was aiming to aligning coverage with: the unique challenges faced by different segments of the food service sector.

What can insurance agents do?

Insurance agents we can ensure that their restaurant establishment clientele are being classified correctly under the new codes. As always, strong risk management is an essential part of controlling costs. Some types of restaurants may not only see changes in their premiums based on the new classifications, but their individual experience modifier will also impact rates. By keeping claims severity and frequency below he industry average, and safety measures well positioned, restaurant owners can also keep their premiums down.

What do I think?

It's ill timed. While the WCIRB's classification change was long in the making, it comes at a particularly difficult year for our service industry. The year was marred by pandemic-era loan and rent repayments coming due; and inflation of ingredient prices, (yes, the war in Ukraine affects the cost of U.S. flour), and services such as kitchen repair. A spate of state and local legislation is also shifting the landscape, including an increase in the minimum wage for fast-food chain workers by nearly 25%, bumping hourly pay to $20 an hour for restaurant locations with more than 60 outposts in the U.S.

Come July, surcharges for employee tips, health insurance, and other benefits will be outlawed, with operators having to roll those into the listed menu. It's hard to track what is eating up all the cash since it's a tough business. But I know this: costs are higher than ever; risks are higher than ever. With the margins razor thin, there are definite challenges ahead for the restaurant and hospitality industry.


Jorge Alexandria is the Vice President of Workers' Compensation Claims for the J. Morey Company and former Director for the U.S. Labor Department, 18th Compensation District. He is also an Army combat medic veteran who received a Master's degree in Public Administration. He can be reached at Riskletter@mail.com

Lonce Lamonte, publisher, editor, adjustercom; copyright by Lonce Lamonte and adjustercom; all rights reserved. lonce@adjustercom.com

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