ITEM 1 ISO Fire Protection Rating Systemro g
jJEAGUE OF
MINNESOTA
CITIES
CONNECTING & INNOVATING
SINCE 1913
RISK MANAGEMENT INFORMATION
THE ISO FIRE PROTECTION RATING SYSTEM
Many insurance companies use ISO's PPC evaluations as a
factor in setting the premiums they charge for property
insurance; the better the community's PPC grade, the lower
the premiums the insurance company would charge for
property insurance in that community. ISO's data on fire
losses indicates that communities with better fire protection
as evaluated by the PPC do in fact tend to have lower losses
from fire damage than other communities.
This memo gives an overview of the factors that affect a
community's PPC rating, how these ratings affect insurance
premiums, how the city can have its rating reviewed, and
where the city can get more information on the ISO PPC
process.
Factors for PPC Ratings
Highlight
The Insurance Services Office, Inc.
(150) has for many years done
evaluations and ratings of the fire
protection provided in
communities. This system is
called the ISO Public Protection
Classification program, or PPC.
The PPC process grades a
community's fire protection on a
scale of 1-10, based on ISO's Fire
Suppression Rating Schedule.
ISO's PPC system has been in use since the early 1900's, and has been continuously modified and
refined over that time. The Fire Suppression Rating Schedule (FSRS) looks at a great deal of
specific information about the fire department, the water supply, and the types of property in the
community, and uses a fairly complex process to evaluate that information. In general though,
here are the factors the PPC system looks at.
Water Supply
Water supply is the most important single factor,
and accounts for 40% of the total rating. The
FSRS compares the water supply available at
representative areas of the community with the
amount needed to fight a fire in the types of
buildings there are at that location. In addition,
there are some specific minimum requirements
for specific classes; to be Class 8 or higher, for
example, the city must have the water supply and
equipment to deliver at least 250 gallons per
minute for at least two hours.
ISO Fire Rating Factors
Alarm and
\
dispatch
10%
Water
supply
Training
40%
9%
Personnel
15%
Equipment
26%
This material is provided as general information and is not a substitute for legal advice.
Consult your attorney for advice concerning specific situations.
LEAGUE O:F MINNESOTA. CITIES 145 UNIVERSITY AVE. WEST PHONE: (651) 281-1200 PAX: (551) 281-1298
INSURANCE TRUST ST. PAUL. MN 55103-2044 TOLL FREE: (800) 925-1122 WEB: WWW.LMC.ORG
Fire Equipment
Fire equipment accounts for 26% of the rating. Again, there are both some specific minimum
equipment requirements, and additional equipment standards based on the numbers and types of
structures in the community. Regular testing of the equipment is also a factor. (Incidentally, the
ISO rating system does not have a maximum age for fire trucks, but instead focuses on the
equipment's capabilities. If the 1949 pumper is tested regularly and meets performance
requirements, it's as good as a brand new truck as far as ISO is concerned.)
Personnel
Personnel accounts for 24% of the rating. 15% of that is based on the numbers of firefighters
available for the initial response and how quickly the firefighters can respond. The other 9%
reflects the initial and ongoing training the firefighters receive.
Alarm/Paging System
The alarm and paging system accounts for the remaining 10% of the rating.
When ISO rates a community's fire protection, they will prepare a "Classification Detail Report"
which shows in detail how much credit the city received in the rating process for each item
reviewed, compared to the maximum credit possible for that item. ISO will also prepare an
"Improvement Statement" which identifies what changes a city would need to make in order to
move up to a particular grade. To get a copy of these reports, the fire chief needs to request them
from ISO in writing on official letterhead.
Re -rating the City's Fire Protection
ISO will periodically send the city a "Community Outreach
Questionnaire", asking for information about the city's fire
protection system. If the city completes and returns the
questionnaire, ISO will check for significant changes in the
city's fire protection system that might merit a review of the
city's current classification.
Changes in the area served, improvements in the city's water
system improvements, additional fire stations constructed,
new equipment added, improvements in the city's alarm and
paging system, etc., are some of the items most likely to
trigger a review. If the city has made improvements in any of
these areas, it may be worthwhile to contact ISO to request a
survey. The city can also download a copy of the community
Outreach Questionnaire from ISO's web site, complete the
survey, and return it to ISO to get the process started.
Pa
Learn More
ISO's website
www.isomitigation.com/firel.htm
I offers a great deal of useful and
well -organized information on the
Public Protection Classification
system and the Fire Suppression
Rating Schedule.
You can also contact the ISO
office for Minnesota by phone or
mail.
Insurance Services Office
111 North Canal Street, Suite 950
Chicago, IL 60606-6214
(312) 923-0070 or (800) 444-4554
Fire Protection Ratings in
Minnesota
The chart to the right shows the current
distribution of ISO PPC ratings in
Minnesota.
How ISO PPC Ratings Affect
Insurance Premiums
The table to the right shows how the
premiums would vary for some
typical structures under a couple of
insurance companies' current rating
schedules. Keep in mind though that
every insurance company sets its
own rates. While these figures are
reasonably representative of how
much difference the fire rating can
make in an insurance buyer's
premiums, the amounts and
percentages of the premium credits
for the various fire classes will vary
among insurance companies.
Here are some points to note:
In this schedule, no additional credit is given on residential property for a fire class better than
7. The reason has largely to do with the role that water supply plays in the ratings. Having a
better water supply helps in fighting fires in larger commercial structures, and therefore is
reflected in a better rating. But for most residential fires a lesser water supply is actually
needed, and having more than that available really doesn't help the fire department fight that
particular residential fire any better. There's some variation among insurance companies (e.g.,
some might allow additional credit for class 6, others might lump classes 7 and 8 together for
rating purposes, etc.) but this general pattern is fairly typical for residential premium structures.
Not all insurance companies use the ISO PPC
classifications. This is especially true for residential
coverage. Some companies have their own rating
systems based on their own historical loss data for the
area rather than on an evaluation of the fire protection in
the area. Other insurance companies use their own
systems for rating the fire protection for a particular
property; a company might classify properties based on
Something to Think About
LMCIT also uses the ISO PPC ratings
as a factor in determining
premiums for coverage on the
city's own buildings.
Representative Insurance Premiums
Fire
Class
$150,000
residence
$1,000,000
office building
1
$670
$2,950
2
$670
$2,980
3
$670
$3,020
4
$670
$3,040
5
$670
$3,060
6
$670
$3,120
7
$670
$3,230
8
$777
$3,330
9
$972
$3,440
10
$1,072
$3,710
In this schedule, no additional credit is given on residential property for a fire class better than
7. The reason has largely to do with the role that water supply plays in the ratings. Having a
better water supply helps in fighting fires in larger commercial structures, and therefore is
reflected in a better rating. But for most residential fires a lesser water supply is actually
needed, and having more than that available really doesn't help the fire department fight that
particular residential fire any better. There's some variation among insurance companies (e.g.,
some might allow additional credit for class 6, others might lump classes 7 and 8 together for
rating purposes, etc.) but this general pattern is fairly typical for residential premium structures.
Not all insurance companies use the ISO PPC
classifications. This is especially true for residential
coverage. Some companies have their own rating
systems based on their own historical loss data for the
area rather than on an evaluation of the fire protection in
the area. Other insurance companies use their own
systems for rating the fire protection for a particular
property; a company might classify properties based on
Something to Think About
LMCIT also uses the ISO PPC ratings
as a factor in determining
premiums for coverage on the
city's own buildings.
the individual property's distance from a fire station and water supply, for example.
Improving the city's ISO PPC rating will likely have the biggest impact on citizens' insurance
costs if your city is in one of two situations:
• The city is currently in one of the lowest ISO PPC classes; or
• The city has a significant amount of commercial or industrial property.
Pete Tritz 10/04
M