How Encouraging Proactive Risk Management Improves a Restaurant’s Insurability
The restaurant industry is expected to reach new sales heights in 2025, according to the National Restaurant Association’s “State of the Restaurant Industry 2025” report, which projects $1.5 trillion in sales and more than 200,000 new jobs. Nevertheless, restaurants are still grappling with a wide range of challenges, including steep labor costs, high employee turnover, rising workers compensation rates, and increasing premiums for property and liquor liability.
Of all these, the most significant challenge facing the restaurant industry continues to be labor challenges.
Among the industries most affected by first-year workplace injuries in the last five years, the restaurant industry leads the way with 51% of workers comp claims, according to the “2025 Travelers Injury Impact Report.” In addition, the average number of lost workdays in the services industry increased by eight days compared to the prior five years—reaching an average of 78 days, the report said.
In the past four years, labor costs have risen 31% for the average restaurant, according to the National Restaurant Association (NRA).
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In addition, “we hear a lot about the high turnover rates in the industry, and it’s very real,” says Brennen Grone, executive vice president of sales at Rainbow. “Different states have different challenges with this issue, and a lot of it is driven by minimum wage laws.”
“We’ve seen the cost of living and inflation rise tremendously, and some states still pay a pretty low minimum wage, forcing people to rely on tips and having to work multiple jobs,” Grone says. “I think that has caused the high turnover rates.”
Another significant challenge impacting the industry is commercial property insurance. “We’ve definitely seen increasing premiums, and reduced capacity in commercial property have had a hard impact on the restaurant and hospitality space,” Grone continues. “This really struck hard, especially in this hospitality space in the middle of 2020, leading to a lot more stringent underwriting and shrinking availability, resulting in higher rates for these restaurant clients.”
In the face of such challenges, agents can play a crucial role encouraging restaurant owners to take proactive measures to improve their insurability and potentially lower premiums.
“Agents play a pivotal role helping restaurant owners navigate these headwinds,” says Mike Brassil, vice president of small commercial at Nationwide. “First, by understanding the client’s business model, including their hours, delivery exposure, alcohol sales, and employee training programs, agents can advocate for tailored risk control measures and appropriate coverage.”
In an industry where operations can change frequently, “one of the best ways agents can help restaurant clients manage these challenges is to make sure they are adequately protected in the event of a loss,” says Rachel Kallmyer, industry lead, Travelers. “Keeping up to date with the client’s revenues, property values and payrolls can not only help ensure coverage is appropriate but can also avoid significant premium fluctuations at the time of audit.”
One avenue would be for “agents to consider specialized billing options, which allow businesses to report payrolls and pay workers comp premiums on a monthly basis,” Kallmyer says. “This can make it easier to properly account for and navigate employee changes throughout the policy term and is especially important for restaurants, which are more likely to have seasonal staffing changes.”
Further, “strong safety programs can reduce workers comp losses, while employee retention strategies can lessen claims volatility,” Brassil says. “Agents should also leverage carrier-provided risk management resources to help clients implement proactive loss mitigation tactics.”
By developing a niche working with restaurants, agents can develop deep expertise and stay up to date on any changes that may be coming down the pike. “For an agent, the real value you provide is being a trusted adviser who’s not just providing the lines or the pricing that your insured needs, but helping them understand the gaps, what loss control measures they should be implementing to get better rates over time from underwriting or for underwriters to get into better programs,” Grone says.
“I see a lot of good restaurant businesses that are clean but are sitting in the excess & surplus market,” Grone adds. “An agent that is willing to advocate to the right carriers and their underwriting teams with a good, strong narrative and understanding of the business and what they need could be getting more favorable terms in the admitted market.”
Olivia Overman is IA content editor.
