Frequency Declines But Lost Time Claims Costs Rise in Restaurant Workers’ Comp: Marsh

A shortage of workers in the restaurant industry is leading to more expensive and complex claims in workers’ compensation even as claim frequency declines, according to a recent report and webinar.

Marsh recently released its Restaurant Industry Practice 2022 Report and held a companion webinar, 2022 Restaurant Industry Loss Cost Trends. The report and webinar analyze survey responses from 47 participating restaurant companies and detailed workers’ compensation and general liability loss data from 21 participating restaurant companies representing 30 brands. The report was designed with cooperation from industry veterans to ensure front-line, hands-on usefulness to food service employers.

Overview

The average overall severity of a food service workers’ compensation claim in 2021 was $4,474, while the lost time average severity was $18,345.

“Closure rates have dropped for the entire pool in workers’ compensation by 10% (from 75% to 65%) going from 2020 to 2021,” said Adrienne Harrell, principal, Oliver Wyman Actuarial Consulting, property and casualty practice.

“This is driven partially by a drop in the number of medical-only claims, which leads a mix more heavily weighted toward indemnity, which is more complex and harder to close,” she said. “However, closure rates for indemnity claims, specifically, have remained relatively stable over the last five years (40%-45%).”

Harrell said that a trend to watch in workers’ compensation is the rising costs associated with lost time claims.

“While the frequency of all claims has dropped significantly, lost time claims, which are more expensive, have a fairly stable frequency and a rising cost associated, which will change the mix of claims to be more expensive and complex going forward,” she said.

The frequency of litigated general liability claims has decreased by 27% per year over the past five years, according to the study. However, the average incurred severity for a litigated claim has risen from an average of $18,000 to $20,000 in 2017-2019 to between $30,000 and $32,000 in 2020 and 2021, Marsh said.

The study found that most restaurants, about 92.7%, report their workers’ compensation claims within seven days of a loss. For general liability claims, that number drops to 82.8% reporting within seven days.

Both casual and quick dining categories are included in the study’s statistics, and that information is broken out in the full report.

The study noted that the suspension of non-essential court proceedings during the COVID-19 pandemic may have led to an overall lag in what is being reported versus actual events. According to Marsh’s report, these delays have caused a false decline in the restaurant industry’s litigated claim frequency and a shift in risk profile to higher-dollar claims. Court proceedings for claims that occurred in 2020 and 2021 may still be in progress, the report noted.

Teen Workers vs. Experienced Peers

The restaurant industry employs large numbers of younger workers with high employee turnover rates, leaving it more vulnerable to workers’ compensation claims, the report said.

The study found that inexperience leads to workplace injuries, noting that workers with less than two years of experience represent 55.2% of incurred losses and 62.8% of claim costs over the last five years.

Teenage workers tend to show additional risk for injury in the restaurant setting, Marsh said. The percentage of incurred losses stemming from teenage claimants increased from 4% in 2017 to 10% in 2021. Similarly, the percentage of reported claims stemming from teenage claimants has increased from 11% in 2017 to 20% in 2021.

Staffing shortages in the hospitality sector, and in restaurants, have meant more teen workers and inexperienced workers are in the workforce. The report noted that teenage hiring trends are one cause of the sharp distributional increases in 2021.

The staffing shortages pushed some organizations to change their hiring requirements, said Cindy Smail, senior vice president, Marsh Advisory, food & beverage leader, workforce strategies. For example, a company may lower the hiring age from 18 to 16 to open a new pool of job candidates.

“It could also be that you just have a bigger percentage of those workers that are teenagers in general, without even changing their standards, because you’re really trying to exhaust that pool for every worker you can get,” she added.

But there’s also a difference in how younger workers, aged 34 and under, tend to sustain claimable injuries on the job, Marsh noted.

In 2021, 26% of younger workers’ injuries were caused by cuts, punctures and scrapes, compared to just 10% of older workers’ injuries. For older workers, 22% of injuries were caused by falls, slips and trips, compared to 15% of younger workers’ injuries, the report revealed.

Employers can use these statistics to plan how to emphasize aspects of training and assignments based on age, Marsh recommended. It’s also a base for planning ergonomic measures that will protect workers not only by task but by their age group.

Employers should ensure that younger workers with less work experience get the onboarding and training they need to succeed safely, Marsh said. Mentorship, pairing a younger worker with an older worker with a good safety record, can also help them assimilate more quickly and with better results.

General Liability

While overall loss rates have decreased by 2% per year, a sharp divergence existed between the study’s “leading” and “lagging” participant groups.

While claims are inevitable, employers can mitigate injuries before they happen and improve claims results by acting with speed and compassion for an injured employee.

Common general liability concerns include slip and fall claims and, increasingly, aggressive behavior and violence in the workplace or onsite.

Marsh recommends that for risk management for slips and falls, restaurants should include policies that work to prevent injuries such as mopping floors on a set schedule that takes advantage of low traffic. When it comes to handling aggressive coworkers or customers, providing management and employee training for de-escalation procedures is key.

Another important thing to consider when managing claims is how the employer reacts post-claim, the study noted. “Avoidance of litigation is something that we all want to achieve,” said Brian J. Gannon, vice president, Marsh Advisory, claims consulting practice. “One of the best ways to do that is to keep injured workers involved in what’s going on.”

He said that employers who provide injured employees with meaningful and productive work within their capabilities while injured reinforces a sense of community for the injured worker. This engagement, coupled with a fast-moving claim, will see better results than a claim that drags on, making an employee hostile or resentful toward their employer.

View the full webinar, 2022 Restaurant Industry Loss Cost Trends.