Insurance, AFD, and you…

Tuesday, October 27, 2009

The Insurance Services Offices (ISO) is a private company that analyzes risks for insurance companies to help them base their insurance rates in metropolitan areas throughout the United States. Part of this rating system is based on an assessment of potential property loss due to fire and natural disasters, and therefore is heavily dependant on the ability of that area’s fire department to respond to those incidents. The last time that ISO audited the Anchorage Fire Department and support utilities was in 2006, and prior to this audit Anchorage held a rating of Class 3 / Class 8. Class 3 was the rating given to the Anchorage Bowl area, and Class 8 was given to the Anchorage Hillside, with much of the discrepancy due to the lack of hydrants on the Hillside. After an extensive review of training records and an operational exercise that proved Anchorage Fire Department resources could adequately provide a sustainable water supply sufficient to battle structure fires on the Hillside, the ISO awarded a Class 2 rating for the entire Municipality. This dropped insurance premiums for numerous Anchorage residents; residents living outside of this area are still seeing ratings as high as Class 10. Here is the press release from that audit: AFD 3-8-06

Besides the training records and operational exercise, the higher grade the Anchorage Fire Department earned in 2006 was attributed to adequate staffing levels, and having fire stations placed in geographical locations that allow first responders to quickly arrive on the scene of a fire to keep property loss to a minimum.

Below are two pieces that have been recently published regarding ISO ratings:

Letter to the Editor -

Captain Jim Veatch is a 25 year veteran with the Anchorage Fire Department. He submitted this letter to the editor after having a lengthy discussion with a State Farm executive regarding tentative insurance rate increases due to fire station closures. It appeared in the Anchorage Daily News on Thursday September 24th.

City cuts may raise insurance rate

ISO is the Insurance Services Offices. They inspect and rate fire departments to give insurance underwriters a basis for pricing residential and commercial fire insurance. Some of the things they look at are number, size and location of fire stations. They look at training, fire prevention and administrative paperwork as well.

A class 1 rating is the highest rating a fire department can receive. Anchorage is currently a class 2 fire department and it took 10 years to get to that level. It allows Anchorage homeowners and businesses to purchase fire insurance at some of the lowest rates possible.

I spoke with my insurance agent, who’s sure our rates will go up with station closures and fire trucks being decommissioned. This could mean a $250,000 home may have premiums go up by as much as $75 a year. Not too bad, really, but multiply that figure by 75,000 homes and the increase is $5.6 million per year, and that doesn’t include commercial structures. The total could approach $12 million per year, year after year.

The mayor has asked for $4.5 million in cuts to the Anchorage Fire Department budget and staffing. This means that it could cost $1 million more to insure our homes than to keep firefighters. It appears to me that closing fire stations and laying off firefighters may cost more than some have bargained for. It may take 10 years to get our ISO rating back to a class 2.

– Captain James Veatch

And secondly, an article from the Insurance Journal in regard to the city of Atlanta’s recent recall of fire station closures:

Oxendine Says Atlanta’s Steps Should Improve Fire Safety Rating

July 23, 2009

Atlanta’s decision to end firefighter furloughs and re-open fire stations is likely to improve its insurance industry fire safety rating, according to Insurance Commissioner John W. Oxendine. “I’m pleased with the progress Atlanta has made thus far in returning firefighters to work and staffing recently closed fire stations,” he said. The rating by the Insurance Services Office, Inc., which uses data on firefighting readiness in communities across the nation, has an effect on homeowners insurance premiums. A lower number on the 1-10 ISO scale means better fire protection. Due to furloughs and other factors, Atlanta’s rating had dropped from a 2 to a 4. Oxendine said Atlanta is now rated a 3 but he hopes ISO will raise it to 2. The city recently announced that furloughs for all public service employees, including firefighters and police, would end. Oxendine said the final report card on Atlanta’s ISO rating will be due in October.