ISO is not what it used to be for many of us.
I am constantly confused with some of the discussion about ISO. Some people seem to think it is some sort of Government regulatory agency that holds power over the fire service. “We are rated at 5, plus we were mandated to upgrade our tanker from 2000 to 3000 gals.” How does the ISO “MANDATE” anything?
An article on this site constantly makes statements such as, “By lowering the communities ISO rating there will be a decrease in the insurance rates. This rate decrease should offset the costs of the improvements.” With no caveat that this does not apply to everyone.
I would question broad comments such as above and, “The ISO rating is then used to determine the insurance rates for the community that the fire department is responsible for.” And “ISO is the principle provider of insurance underwriting, rating and statistical information that is sold to the insurance industry.”
Perhaps this is true in your state, but not in mine.
I would like to point out that some insurance companies, in some states, use ISO’s data to determine premium rates and some insurance companies still buy their information.
For example, since 2001, the largest home insurance company in the U.S. does not use ISO unless state law requires them to do so. State Farm does not employ the ISO, Public Protection Classification (PPC) rating to set rates. They use a system called the “Subzone Rating Factor System” which is roughly based upon the actual fire loss in a zip code. (See: ISO ratings no
longer a factor for State Farm) http://firechief.com/mag/firefighting_iso_ratings_no/
I have been told, by State Farm Agents, that some other (smaller) insurance companies just use State Farm’s ratings and premiums as their guidelines, but I have not found a way to verify this.
Some very populated states, such as Texas and Illinois do not require insurance companies to use ISO. Should we really we be putting all our eggs in that basket anymore? Should ALL of us rely so heavily on ISO to justify our budgets?
I have seen fire chiefs (in Texas) stand up before city councils and state unequivocally that a better ISO /PPC rating will mean that residents will pay lower insurance rates. I once saw this in an affluent community where possibly as many 50% of the residents have State Farm.
I have to wonder if the continued importance of ISO might be merely based on the historical dependence upon it to get funding. Fire Chiefs want to able to point to an agency (in this case a pseudo-agency) and say, “We are required to have this and that resource.”
Some day, a smart city council member, who doesn’t support the fire department, will embarrass a fire chief who says “Better ISO/PPC rating = lower rates.” This councilman will say something like, “I have State Farm, will it lower my rates?” He will than go on to say, “What other insurance companies don’t use ISO/PPC?” And perhaps, “What percentage of the population of this city will actually see ANY reduction in premiums from these changes? It will be an embarrassing day for that chief.
Should we prepare ourselves for justifying our needs by other than ISO/PPC scores? Or should we just keep pretending that ISO matters like it once did and hope city councils and anti-government activists don’t find out?