ISO ratings have drastic effect on insurance premiums

When Coarsegold resident Patrice Anderson opened her insurance renewal letter a few weeks ago she had no reason to suspect anything had changed. But to Anderson’s surprise, her rate not only changed it had jumped from a manageable $1,503 a year to an eye-popping, heart-stopping $5,393.

Since finding out her insurance would dramatically increase Anderson reached out to her insurance carrier, Allied through AMCO, hoping it might be a mistake, but it was not. Instead, Anderson was told the recent reassessment of Insurance Service Office’s (ISO) Public Protection Classification (PPC) rating was the cause for the jump and that she would be hard pressed to find a carrier who would insure her at all.

The ISO is a privately owner assessment company, under the umbrella of the Verisk corporation, which collects statistical data on fire departments suppression abilities and then assigns a numerical rating, on a scale of 1-10, to homes in that area based on that specific departments fire suppression capabilities to the surrounding areas.

According to Madera County Fire Marshal Deborah Keenan, the ISO filed a revision with the state insurance department in December of 2012 calling for a reassessment of ratings throughout the state. This assessment measures a community’s fire suppression system and then assigns a specific numerical grade called a Public Protection Classification (PPC) that is used by insurance companies as part of their assessment for property and home insurance policies across the state.

The ISO has extensive assessments for more than 47,000 fire-response fire districts across the nation and provides information through the PPC program and issues up-to-date information about community’s fire protection programs.

By classifying communities' ability to suppress fires, ISO helps the communities evaluate their public fire-protection services. The program provides an objective, countrywide standard that helps fire departments in planning and budgeting for facilities, equipment, and training. By securing lower fire insurance premiums for communities with better public protection, the PPC program provides incentives and rewards for communities that choose to improve their firefighting services.

With the Insurance Service Office (ISO) making changes to the Fire Suppression Rating Schedule (FSRS) ratings many communities throughout the foothills will soon see dramatic changes to their PPC ratings and in turn, their insurance premiums. In some extreme cases some Madera County homeowners are not able to find coverage and are being forced to use alternative ‘last resort’ insurance companies such as Lloyd’s of London and California FAIR plan association.

“We’ve got insurance companies who if you are above a certain elevation you already have two strikes against you. There are some people who will not be able to find coverage. They would be considered lucky if their insurance companies still have a policy for them,” Keenan explained.

The ISO’s PPC rating is based on a numerical scale from 1 to 10, one representing a superior property fire protection and 10 representing and area which does not meet ISO’s minimum fire suppression standards.

According to 10% of the ISO rating is based on the community’s emergency communications capabilities, including 911 telephone systems, adequacy of telephone lines, operator supervision and staffing, and dispatching systems. Additionally 50% of the rating reflects the quality of the fire department, including adequacy of equipment, sufficiency of staffing, level of training and the geographic distribution of fire companies. The remaining 40% is based on the water supply in that particular region.

An ISO mitigation article stated “the FSRS incorporates nationally accepted standards developed by such organizations as the National Fire Protection Association (NFPA), the Association of Public Communications Officials (APCO), and the American Water Works Association (AWWA).”

When these organizations change their standards, the ISO evaluation changes as well, providing up-to-date information helping fire department’s and public officials better understand the successes of their effectiveness efforts and their needs for improvements.

According to Keenan, these detailed assessments include reviews of the departments fire stations, dispatch center, how many hours of training volunteers get, GIS system, mapping programs - even down to what type of nozzle is used.

Keenan said other major factors used by insurance companies, and the ISO, in calculating risk for a customers property include whether or not the home owner is within five mile (driving miles) of an approved fire station and within 1,000-feet of an approved hydrant. Those property owners in the Mountain Area that meet these standards normally are assessed a ISO rating of “6” while those outside the five miles or more than 1,000-feet from a hydrant are given a rating of “9” or “10.” These changes can have a significant impact on the price of insurance and the effectiveness of coverage.

In some cases despite being near a fire department many customers are still seeing their premiums increase. Many of these customers are under the false impression they are within the necessary five mile radius because they are located near a Cal Fire fire station or U.S. Forestry Service station. However, according to the ISO, Cal Fire and Forestry stations do not meet the minimum equipment requirements for structural fire suppression and therefore are not approved by the ISO for structural fire suppression.

“This is where the confusion is for a lot of the residents. Those [Cal Fire stations] are deemed ‘wild land’ fire stations, while the ISO rating schedule is designed for ‘structural’ fire suppression. Wild land fire assessment is another assessment done by the insurance company. The ISO deals with structural fire suppression only not wild fire suppression. It deals with hose diameter and the engine components (tools on the engine) and Cal Fire stations mare what is not compliant with ISO structure requirements,” Keenan said.

According to Keenen the recent ISO’s reassessment comes 10 years after the ISO’s last assessment which happened in 2004. According to Keenan not much has changed since 2004 aside from the amount of volunteer fire fighters.

“The last time we were rated was in 2004 and there is nothing in our infrastructure that has change. Our old equipment met minimum ISO standards as does our new equipment. The one thing that has change is the number of paid call firefighters. Our paid call firefighters has declined significantly,” Keenan said.

Since their reassessment of the area four Eastern Madera County fire stations have lost their ISO approval rating mainly due to a lack of personnel. Those station include station #17 (O' Neals), station #18 (Cedar Valley), station #14 (Bass Lake), and station #8 (Indian Lakes). Although station eight is in the appeal process since its recent administering of a Paid Call Staffing (PCS) program.

“We had never had PCS at station eight but they had enough interest last summer they have started a PCS program. It is also our best staffed station,” Keenan said. “We lost station 14 (Bass Lake) and that was a huge loss cause now you have all those resident and property owners who according to ISO have no fire protection. They were at one point recognized but as February they are not.”

Stations still recognized and approved by the ISO for having proper fire suppression capabilities include station #10 (YLP), station #11 (North Fork), station #12 (Oakhurst), and station #13 (Coarsegold). Stations 15 (Raymond), 16 (Ahwahnee), and 14 (Bass Lake) are all Cal Fire stations and are not ISO recognized.

Oakhurst resident Rick Lawin said he is concerned that the recent rise in insurance premiums could have a significant impact on the community and housing market which has since a steady decline since 2008.

“These issues have a significant cause and effect on the vitality and growth of the foothill area,” Lawin said.

According to Keenan, who lives in the Mountain Area, when customers see an increase in rates they should remember that not every company uses the ISO to determine its coverage.

“They need to shop around, not every insurance company uses ISO ratings. My personal insurance company does not use ISO. I was still able to get insurance because my insurance company does not utilize ISO,” Keenan said.

So what is being done to help fire relief and provide more protection in the area and to the residents?

On Tuesday, April 7, Keenan, along with Fire Chief Nancy Koerperich and several other fire suppression representatives, presented an information item to the Madera County Board of Supervisors notifying them of the recent new assessment and challenges facing Eastern Madera County. Keenan said they hope to develop a plan that would give Eastern Madera County the resources necessary to provide adequate services required by the ISO.

“The direction to staff was to bring ideas to the board for discussion. Some of the things discussed is looking at the feasibility of a tax measure,” Keenan said. “There is no revenue stream to fund a fire department. That is general fund dollars. The cost to the general fund to improve the fire department would be substantial in a time that our sales tax revenues are not 100% recovered. What we are trying to do is gain general public support for a tax measure, possibly sales tax or property tax, but the public would have to support it and it would have to be county wide.”

Keenan said they were directed by the board to look at all possibilities, including privatizing the fire department, with the understanding that the county is still in the red, budget wise.

Meanwhile, Madera County District 5 Supervisor Tom Wheeler said he has written countless letters over the past four years to Sacramento legislatures urging them to change the way insurance companies assess risk and what agencies they use to do those assessments. Wheeler said new federal or state legislation is needed to put the insurance companies under the Public Utilities Commission (PUC) much like gas an electric.

“You have to get legislation to force insurance companies to have a Public Utilities Commission (PUC) make these decisions, not a private company paid by the insurance companies themselves,” Wheeler said.

Wheeler believes the problem lies with the way fire departments are rated and the fact that the ISO is paid for by insurance companies who benefit from increased rates. Wheeler called this a conflict of interest.

“It’s a private company that works for the insurance companies. I’ve been writing the politicians in Sacramento to change it but the insurance companies are powerful and it doesn’t change,” Wheeler said.

Aside from state and federal legislation, Wheeler and Keenan agree that funding is the number one issues facing Madera County and the main reason why there is not more fire personnel in the Mountain Area.

“We just don’t have the money and if we had the money and it was dedicated only to the sheriff’s and fire departments we would be able to properly staff our sheriff and fire department. If we could do that then our ISO ratings would go down,” Wheeler said.

During Tuesday‘s board meeting Keenan was asked by the board to assess potential remedies to the current problem, one of them being a property or sales tax measure directly funding the sheriff’s department and fire departments.

“I have talked about this since I have been elected,” Wheeler said. “Mariposa has one (tax measure) that was passed four or five years ago. It’s a one time tax every year on their parcel and it’s on their property tax bill.”

Keenan said they are not sure what tax would work best, sales or property, but are leaning towards a small sales tax increase because it would be more equitable for everyone in Madera County, including visitors who may use the services during accidents and other unforeseen events. Either way the voting public would be the deciding factor on whether or not this tax would be imposed.

Wheeler believes with the economy on the rise and insurance premiums headed upwards, now is the time for this measure.

“It’s the only way we can do it. There just not the number of volunteer fire fighters that there once was. A lot of them used to do it to get on with Cal Fire. If we could pay for their training and uniforms we could get volunteers but right now we don’t have the money to do that. This way we could fully fund our sheriff’s stations and fire stations in Eastern Madera County,” Wheeler said.

For more information on how this might effect your area or to determine your ISO rating contact your insurance provider representative or contact Keenan at the Madera County Fire Marshal’s Office.