When ISO Rates Volunteers, Records Of Manpower Response Are Important
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The evaluation of volunteer fire departments and the concepts of insurance both have their roots in ancient civilizations. Indemnity for fire losses can be traced back over 2500 years to the towns and districts of Assyria. References to organized fire brigades have been found in the ancient records of Rome. However, it was not until after the crippling London fire in 1666 that organized fire fighting and fire insurance evolved as we recognize it today. Both grew from a social need to be protected from the devastating effects of fire.
Fire departments and the insurance industry offer a sense of security in people and business that is essential for growth and prosperity. The availability of fire departments and fire insurance to help people with the tragedies of life, such as devastating fires and explosion accidents, sickness, windstorms and death itself, provides the general public with peace of mind.
When ISO comes to town
What happens when the Insurance Services Office comes to your town? Who are these people and what are they looking for? What are they going to tell you to do? Will anything happen if they find something wrong?
These are typical questions asked of or about ISO when a survey is scheduled for a community. These questions are not asked solely by volunteer fire departments. They tend to come more frequently from volunteers since they generally are not fortunate enough to have a professional city manager who will seek out such answers. City managers of larger communities are usually more familiar with ISO because they are involved in the technical aspects of the communities’ own insurance coverage.
ISO evaluates volunteer fire departments which have a wide range of abilities and responsibilities. We see departments with neglected equipment, no personnel training, and no outside fire prevention activities. On the encouraging side, we see real professionalism with expertise in suppression, prevention and real involvement in the planning of future community fire protection needs.
Volunteer fire departments are not confined to rural areas. We have evaluated communities with volunteer fire departments ranging in population from 50 to 250,000. Roughly 85 percent of the communities evaluated by ISO have volunteer fire departments.
Ben Franklin led the way
The interreaction of insurance and the volunteer fire service started in this country during colonial times. Great leaders like Ben Franklin saw the need for both and he was instrumental in the formation of an insurance company and a volunteer fire company in Philadelphia.
From the time of Ben Franklin, the insurance industry has recognized the positive effect that the public fire service can have in reducing fire losses. The response to such recognition was the development of a method to reduce insurance premiums based on the level of public fire protection that was available. The method used to judge the level of public fire protection used by the insurance industry is now called the Municipal Grading Schedule.
Schedule applied uniformly
When evaluating a volunteer fire department particular attention is given to available pumping capacity, general condition of the apparatus, training activities, and standard fireground operations.
There has been considerable discussion in the past of unfair treatment of volunteer fire departments by the field rating representatives. Much of the criticisms that have been received are based on experiences which may have occurred more than 10 years ago before the inception of ISO. Then each local rating jurisdiction made different interpretations of the grading process. However, today, under the direction of ISO, the schedule is applied uniformly, and no more local limitations on protection classes exist just because a volunteer fire department provides the fire services. There are hundreds of communities protected by volunteer fire departments have have better ISO municipal protection classifications than communities with paid fire departments, so such limitations no longer exist.
What does exist, however, is a method of providing recognition in the grading analysis to the immediate response capabilities of a 24-hour, on-duty, first-alarm response. I don’t believe anyone can deny the fact that immediate initial attack is valuable and should receive recognition. To a traditional volunteer fire department, this aspect does not have to be a limiting feature. Increased capabilities in other aspects of the fire service can be compensated for in the grading analysis. The schedule equates the response of three volunteers to one paid fireman. This equating of 3 to 1 is for the purpose of giving recognition on this relative scale of 1 to 10 to those communities that have immediate response to first alarms by having manpower at the fire station 24 hours a day. There has been considerable discussion over the years questioning the validity of the 3:1 ratio. I do not want to attack or defend the ratio because it is not terribly important since in the end, the result is relative anyway.
One item that should be of particular note to volunteer fire departments is the importance of their manpower response records. The above-mentioned ratio of 3:1 is used for recorded manpower response to actual fires. The response data is collected from the fire department’s records that are kept of all fires. If no records are available, the grading schedule requires that a ratio of 6:1 be used based on verbal estimates of actual average responses.
Fire protection and insurance rates
What usually happens during any discussion about the cost of fire insurance is that the center of attention shifts to public fire protection. The protection that everyone sees and hears is obviously the fire engine responding to an alarm. This aspect of fire protection is all that many people are ever exposed to and, therefore, is the only relationship they see between fire protection and insurance rates.
However, the truth of the matter is that once a fire department has been called, there is generally already a loss because something is burning and something is being destroyed. The role that the public fire service does play at that point, however, is to minimize that loss once it has started. The capability of the public fire services is important for us to know. But we are just as much concerned with other features at the property that will reduce the probability that a fire department will have to be called at all. So, what I want to do is to briefly review the overall rate-making procedure in order to clarify where the Municipal Grading Schedule fits in.
It is not claimed that the insurance rating system will, or was ever intended to, give a dollar-for-dollar insurance cost saving for each dollar spent on reducing hazards. The current system does, however, provide an inducement for loss prevention that should be considered as a supplementary benefit of improving fire protection. The potential for loss of life, jobs and other non-property should be considered as a supplementary benefit of improving fire protection. The potential for loss of life, jobs and other non-property insurance-related considerations should be the primary reasons for improvement. These are not included in the insurance ratemaking procedure.
The first thing that is done is to evaluate the overall premium required in a state by analyzing the loss experience within an individual statistical group of occupancies. There are many variables in construction, occupancy hazards, private protection of hazards, fire spread potential from adjacent buildings, and public protection which must be considered. These varying aspects of an individual commercial property are evaluated on an engineering basis that uses a structural rating analysis which places buildings in their proper hazard relative to each other.
Commercial fire rating schedule
The interrelationship of these various components of a property is brought together by this structured analysis called the Commercial Fire Rating Schedule. I want to stress that the Commercial Fire Rating Schedule only develops relativities of risk analysis from building to building. Picture a scale of 1 to 100 if you will. This individual risk analysis places buildings on this scale. The actual monetary insurance rate is developed from the overall state insurance experience which is then correlated to these individual relativities.
Now what are some of the specific items we evaluate when placing an individual property on this relative scale? The first is construction. It is obvious that buildings of combustible construction would have a higher fire potential than buildings of fire-resistive construction. Specific analysis is also given to floor opening protection, undivided floor areas, roof surfaces and interior finish.
The occupancy of each building is also very important. Special attention is given to the handling and storage of flammable liquids, use of spray painting, cooking hazards, dust collection and trash removal, heat-producing devices, smoking control in hazardous areas, electrical equipment defects and housekeeping.
Private protection generally results in a reduction of loss potential. Automatic sprinkler systems, fire alarm and watchman service, fire extinguishers, and special protection such as halogenated hydrocarbon systems are given special recognition.
And then we come to public protection. To minimize the loss, we want to reflect in this overall relativity analysis of a property what we can expect from the public fire services once ignition has occurred. It is for this purpose that we have the Municipal Grading Schedule.
An engineering evaluation
The schedule provides an engineering evaluation which is used in the development of a logical distinction between areas with no public fire protection and areas with comprehensive fire service protection. The grading of municipal fire protection does not affect the overall rate level adjustments for a state, but does provide a proper relativity for recognizing the quality of public fire protection for the reduction of property loss. This is the grading schedule’s sole purpose.
I have discussed rating of commercial property thus far. Now what about private dwellings? From an insurance standpoint, individual risk analysis is minimal since most private dwellings are very similar and inspection for such dwellings would be economically prohibitive. We class-rate dwellings based on their basic construction and available public protection. However, in many states there are some rating incentives for loss prevention in private dwellings. There are now premium credits available for private dwellings for the installation of fire detectors or automatic sprinkler systems.
Public protection classifications are being grouped for private dwelling property so that the same rate is used for different public protection classes, generally class 1 through class 8. There are several reasons why this grouping has been done, with the primary reason being that our dwelling statistical information, which is kept separately by protection class, indicates quite consistently that there is no substantial difference in burning rates for classes 1 through 8. That is, the actual loss experience of private dwellings does not vary significantly with varying degree of public protection up through class 8.
Meaning to volunteers
What does all this mean to the volunteer fire service? In reality, it should not mean much. I state this since on numerous occasions I have found communities trying to design their fire service programs around an insurance rating system. This is not recommended and not at all encouraged. Insurance rate-making is founded on different principles than effective public fire services and attempting to design one around the other is just not a wise undertaking.
Fire protection and rate-making
ISO evaluates municipal fire protection for the sole reason of fire insurance rate-making. Our purpose is not to try to improve the public protection, only to quantify what is available. Communities are placed on a relative scale of 1 to 10 by application of ISO’s Municipal Grading Schedule. The schedule has four major sections which include fire department, water supply, fire service communications, and fire safety control. The schedule is applied by ISO field rating representatives who visit each community and gather the necessary information to compare the available public fire protection with the insurance rating standards contained in the schedule. This process results in the generation of a fire insurance rating classification ranging from 1 to 10 with 10 representing no recognizable protection. The resulting number is then used as one of the many factors to develop property insurance rates for individual properties located in the community.
