fire insurance ratings dan petersen, fire chief jackson county fire district 3 chair of ofca fire...
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Fire Insurance Ratings
Dan Petersen, Fire ChiefJackson County Fire District 3
Chair of OFCA Fire Insurance Task Force
Laura Cali, Insurance CommissionerOregon Department of Consumer and Business Services, Insurance Division
OFCA Concerns
Fire Chiefs reported significant challenges in working with the ISO
OFCA monitored the situation OFCA and WFCA began working
closely with the ISO National Director of Community Hazard Mitigation
No change in behavior from the ISO OFCA formed Task Force in
December 2012
OFCA Task Force mission
To evaluate and identify options for a credible science/performance based fire insurance rating system that assesses the ability of fire agencies to reduce the risk to both insurance agencies and property owners in Oregon.
OFCA Taskforce goals
Gather ISO Experiences Provide member support Evaluate ISO Identify Options Establish supervision
Task Force Members Dan Petersen, Fire Chief, Jackson County Fire District 3,
Chair John Nohr, Deputy Chief, Portland Fire Bureau Mike Duyck, Fire Chief, Tualatin Valley Fire and Rescue Jim Wenzel, Fire Chief, Klamath Falls Fire District 1 Ted Kunze, Fire Chief, Canby Fire District Brett Fillis, Fire Chief, Applegate Fire District 9 Devon Wells, Fire Chief, Hood River Fire & EMS Doug Koellermeier, Deputy Chief, Bend Fire and Rescue David Sellers, President, Oregon Volunteer Firefighters
Association John Buchanan, Fire Chief, Siuslaw Valley Fire & Rescue Mark Prince, Operations Chief, Hillsboro Fire Margie Moulin, Director, Emergency Communications of
Southern Or. Kelly Dutra, Director, Washington County Consolidated
Communications
What does the ISO do?
Classifies the communities ability to suppress fires to help establish appropriate fire insurance premiums.
Public Protection Classification of 1-10
Evaluate water supply, dispatch, and fire department
New schedule also evaluates operational considerations and community risk reduction
They do not rate your Fire Department
Oregon Fire Departments
What is the classification rating for the majority of Oregon Fire Agencies? Class 8 or 8b for hauled water areas Class 4 or 5 for hydranted areas
What is a class 9? A system with credible dispatch and fire
department but no credible water supply What is a Class 10?
Community that does not meet minimum criteria
If you did not exist…
Insurance for $150,000 home Unavailable or $897 per year
What is the cost of Insurance if you form a Class 8b Fire Department? $680 per year. A savings of $217 per year
How much could a community of 1000 homes save if they form a Class 8b Fire Department? $217,000 per year
Rate quoted by Country Financial in Southern Oregon. Your rate may vary.
Hauled Water Area
Cost of Insurance for $150,000 home Class 9 - $853
4.9% less than 10, a savings of $44 per year Class 8b - $680
20.3% less than 9, a savings of $173 per year Class 7 - $627
7.8% less than 8, a savings of $53 per year Class 6 - $574
8.5% less than 7, a savings of $53 per year
Rate quoted by Country Financial in Southern Oregon. Your rate may vary.
Community Savings
What are the savings to a community with 10,000 homes? Improving a Class 9 to a Class 8b
$1,730,000 per year Class 7 compared to Class 10 (No FD)
$2,700,000 per year
Rate quoted by Country Financial in Southern Oregon. Your rate may vary.
Hydranted Area
Cost of Insurance for $150,000 home Class 5 - $552
3.8% less than 6, a savings of $22 per year Class 4- $505
8.5% less than 5, a savings of $47 per year Class 3 - $465
8% less than 4, a savings of $40 per year
Rate quoted by Country Financial in Southern Oregon. Your rate may vary.
Community Savings
What are the savings to a community with 10,000 homes? Improving a Class 5 to a Class 4
$470,000 per year Class 3 compared to Class 10 (No FD)
$4,324,000 per year What about for 20,000 homes?
$8,648,000 per year
Rate quoted by Country Financial in Southern Oregon. Your rate may vary.
Who is the ISO?
Founded in 1971 Private for profit in 1997 Verisk founded in 2008 by ISO
Executives Employs over 3500 staff 47,000 fire response jurisdictions Funded by subscriber insurance
companies
Experience with ISO
Very little transparency Most documents are considered proprietary
Portions of the rating schedule “just don’t make sense” Cannot find the science behind the
requirements Little consistency in the application Impossible to learn all the impacts in your
grading For profit company
They are not here for the community
Oregon Regulations
Division of the Department of Consumer and Business Services Laura Cali, Insurance Commissioner
To protect the public by ensuring the financial soundness of insurers, the availability and affordability of insurance, and fair treatment of policyholders while maintaining a positive business climate.
OREGON INSURANCE DIVISION MISSION
State-based insurance regulation focuses on consumer protection through financial solvency, product compliance, and market conduct Oregon Insurance Division (OID) structure:
» Administration» Financial & Producer Regulation» Product Regulation» Market Regulation
Authority over all major lines of business:» Property & casualty (includes personal and commercial
products, such as homeowners, commercial property, and general liability)
» Life & annuities» Health
Regulated entities:» Insurance companies, producers, rating bureaus, etc.
Rating organizations in Oregon
Four licensed property rating organizations:» ISO (Insurance Services
Organizations)» AAIS (American Association of
Insurance Services)» Washington Survey and Rating
Bureau» MSO, Inc. of New Jersey
Three of the four have rating plans on file with OID
Rating organizations serve many roles within the insurance industry
Statistical agent» Collects claim and exposure information for use in setting loss
costs» “Loss cost” is the portion of premium that covers claim costs
Loss cost development» Files loss costs on behalf of members and subscribers to use in
developing rates
Classification rating plan development» Files classification rating plans for members and subscribers for
use in Oregon
Policy form development» Files policy forms for members and subscribers to use in
developing their insurance contract language
Insurer use of rating organizations & OID authority
Member insurers can rely on rating organization filings, but have flexibility» Insurers must file their own expense and profit provisions with
OID» Insurers may choose whether and to what degree to adopt a
rating organization’s rating plan and/or policy forms» Insurers may develop independent classification plans or rating
systems
OID’s regulatory authority » Licensure» Form, plan, and rate filings» Market conduct
▹ OID may independently examine rating organizations▹ OID also participates in multi-state exams through the National
Association of Insurance Commissioners (NAIC)
OID review of rating organization classification and rating plans Property & casualty rating plans are “file and use” OID actuaries review filings for compliance with state
laws and actuarial soundness» Reasonable» Not excessive or inadequate» Not unfairly discriminatory
Rating plans must reflect differences in expected losses or expenses» Rating organizations file statistical support» Actuaries evaluate whether rating plan is a reasonable predictor
of claims experience» Causal relationship not necessarily required
OID rating plan review considerations
Unfair discrimination statute requires that two policyholders with the same expected claims costs not be rated differently» Rating categories must be clear and mutually exclusive» Must have sufficient detail to understand how each policyholder is rated
Rating plans may include factors outside an actuary’s traditional area of expertise, such as:» Building code effectiveness» Fire protection» Type of construction» Site geology
OID may seek input from other agencies, entities, or interested parties to obtain subject matter expertise
Market Regulation unit responsible for investigating concerns with rating plan compliance
Washington Survey and Rating Bureau
Non-Profit Transparent with documents and
process Similar schedule
Working with OFCA to address Oregon issues
Need to evaluate the impact of this schedule on your existing rating
Washington Fire Chiefs rate the organization highly
Actions
Insurance Commissioner working with the ISO to address the OFCA’s concerns
Fire Districts need to follow their policy on fees for service with private companies
OFCA is working with the WSRB to prepare their schedule for filing in Oregon
OFCA will evaluate the impact of a new rating schedule on a sample of communities
Task Force Mission
To evaluate and identify options for a credible science/performance based fire insurance rating system that assesses the ability of fire agencies to reduce the risk to both insurance agencies and property owners in Oregon.
Questions?
Dan Petersen, Fire ChiefJackson County Fire District 3
Chair of OFCA Fire Insurance Task Force
Laura Cali, Insurance CommissionerOregon Department of Consumer and Business Services, Insurance Division