CLASSIFYING RISK
A NEW MENU OF RESTAURANT CLASSIFICATIONS
Most of the old restaurant classifications have been eliminated;
13 new ones have been added
By Linda D. Ferguson, CPCU
This year almost every restaurant will receive a new classification.
Restaurants are in the midst of change. Burger King has a new value menu, McDonald's is changing its fries and the five-star Maisonette in Cincinnati has changed chefs! While the basics stay the same--feed the people who show up--changes are constantly made to meet those people's changing tastes. Since the restaurant industry changes, ISO must change the way it classifies risks and collects data in order for the loss cost to be truly reflective of the exposure. Initially the pricing change will be minimal, but as data are collected, more pricing differentiations should
be expected.
In the past, there were 12 possible codes. Two of those classes remain unchanged while 10 have been eliminated and 13 new ones introduced, for a total of 15 classes. ISO has provided a conversion chart, which matches new code to old code for loss costs, but the conversion may be misleading for an individual risk.
These classes are unchanged:
* Restaurants - operated by concessionaires - Not-For-Profit only - 16820
* Restaurants - operated by concessionaires - Other than Not-For-Profit - 16819
The footnotes are also unchanged and explain that in order to qualify for these classes the following conditions must exist:
1) The restaurant must be located in an office building, industrial building or similar place of business and can have any type of service including cafeteria or smorgasbord.
2) The restaurant must be for the use of employees and their guests only.
3) A concessionaire must operate the restaurant.
All remaining restaurant classes have been eliminated. ISO provides loss cost mapping which is a guide to convert from old to new. Unless directed otherwise, companies will follow a fairly routine reclassification process at a clerical level. Rather than allow for the conversion to be made by the company, wouldn't it be better for the ones who best know the risk to provide the guidance?
The listing in the chart below reverses the ISO mapping to help in a review of the restaurant classifications.
This year almost every restaurant will receive a new classification. This classification will be used not only to determine the individual pricing but will also be used by many companies internally to make group pricing decisions and group risk retention decisions. It is an important choice with more far reaching effect than "what's for lunch." Choose wisely. *
The author
Linda D. Ferguson, CPCU, has 30 years of underwriting experience with national commercial lines carriers. She now operates a consulting business, Pleasant Street Consulting Company, in Newtonsville, Ohio. She can be reached at ldfcpcu@hotmail.com
| Old Classification | New Classification | Note |
| Restaurants - with no sale of alcoholic | Restaurants with no sale of alcoholic | There is no longer a distinction |
| beverages - with dance floor - 16813; | beverages with table service - 16900 | between "with dance floor" and |
| Restaurants - with no sale of alcoholic | (Important: Read note for 16901.) | "without dance floor" if there |
| beverages - without dance floor - 16814 | | is no alcohol being served. |
| Restaurants - self-service or self-ordering - | Restaurant without table service | The footnote for code 16900 states including cafeterias and smorgasbords - |
| with seating - 16901 | that table service will include the |
| Not-For-Profit only - 16824; | (Important: Read note in next | waitress delivery that occurs in |
| Restaurants - self-service or self-ordering - | column for exception.) | buffets. Therefore the self-service only |
| including cafeterias and smorgasbords - | | restaurants are included in 16901 |
| Other than Not-For-Profit - 16823 | | while the self-ordering restaurants |
| | will be split between the ones with |
| | table service which will go to 16900 |
| | and those without which will go |
| | to 16901. |
| Restaurants - refreshment stands or | Restaurants with no sale of | There is no longer a distinction |
| drive-ins with tray service - | alcoholic beverages without | made between the for-profit |
| Not-For-Profit only - 16822; | seating - 16902 | and the not-for-profit. |
| Restaurants - refreshment stands or |
| drive-ins with tray service - Other than |
| Not-For-Profit - 16821 |
This old classification.... Is now one of these classes
| Restaurants - with sales of alcoholic | Restaurants with sales of alcoholic | Restaurants with sales of alcoholic |
| beverages that are less than 75% of | beverages that are less than 30% | beverages that are 30% or more of |
| the total annual receipts of the | of the annual receipts of the | but less than 75% of the total annual |
| restaurants - with dance floor - 16815 | restaurant with table service - 16910 | receipts of the restaurant with |
| | dance floor - 16915 |
| Restaurants - with sales of alcoholic | Restaurants with sales of alcoholic | Restaurants with sales of alcoholic |
| beverages that are less than 75% of the | beverages that are less than 30% of | beverages that are 30% or more of but |
| total annual receipts of the restaurants - | the annual receipts of the restaurant | less than 75% of the total annual |
| without dance floor - 16816 | without table service with | receipts of the restaurant without |
| seating - 16911 | dance floor - 16916. |
This old classification.... Is now one of these classes
| Restaurants - with sales of | Restaurants - with sales of | Restaurants - with sales of | Restaurants - with sales of |
| alcoholic beverages that | alcoholic beverages that are | alcoholic beverages that are | alcoholic beverages that are |
| are 75% or more of the total | 75% or more of total annual | 75% or more of total annual | 75% or more of total annual |
| annual receipts of the | receipts of the restaurants - | receipts of the restaurants - | receipts of the restaurants |
| restaurants - with dance | with tables - with dance floor: | with tables - with dance floor: | bar service only (no tables): |
| floor - 16817 | table service - 16920 | no table service - 16921 | with dance floor - 16940 |
| Restaurants - with sales of | Restaurants - with sales of | Restaurants - with sales of | Restaurants - with sales of |
| alcoholic beverages that are | alcoholic beverages that are | alcoholic beverages that are | alcoholic beverages that are |
| 75% or more of the total | 75% or more of total annual | 75% or more of total annual | 75% or more of total annual |
| annual receipts of the | receipts of the restaurants - | receipts of the restaurants - | receipts of the restaurants |
| restaurants - without dance | with tables - without dance | with tables - without dance | bar service only (no tables): |
| floor - 16818 | floor: table service - 16930 | floor: no table service - 16931 | without dance floor - 16941 |