how current issues facing fire departments affect underwriting and property risk annual meeting,...

How Current Issues Facing Fire Departments Affect Underwriting and Property Risk

Annual Meeting, Ohio Insurance InstituteSeptember 1, 2009

At Risk: Effective Fire Protection – What You Need to Know

• Our nation’s fire departments are facing economic, socioeconomic, environmental challenges

• How the ISO Fire Suppression Rating Schedule (FSRS) measures the changes

• What fire chiefs say• What’s the scope of the

challenge?• What if protection worsens?• How some communities are

overcoming the odds and improving their PPC rating

The PPC Evaluation Process – Four Key Parts

Fire Suppression Rating Schedule (FSRS)

US ISO Public Protection Classifications

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ISO Public Protection Classification (PPC) Program

• PPC helps measure effectiveness of fire protection, advisory to insurers and communities

• Only the insurance industry evaluates protection

• Applied nationwide, incorporates consensus national standards

• Verified, validated, robust data-collection process with expert analysis

• Class 1-10

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ISO PPC Program

• PPC used in marketing, underwriting, and pricing homeowners and commercial lines

• Price of insurance generally lower with better protection, thus lower losses; price higher in poorer protected areas with higher losses

• Virtually all U.S. insurers rely on info

• High percentage of local officials rely on PPC to assist with protection decisions

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FSRS Draft Concept 2009

• Comprehensive internal review under way to update FSRS with active involvement of key stakeholders

• Highlights as follows:– More reference to national standards —NFPA and AWWA

– More recognition of automatic fire sprinklers

– More reliance on technology-based solutions (eg.GIS)

– More emphasis on fire training activities

– New reference to national standard safety requirements

– New reference to accreditation —master/strategic planning

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Validating the Impact

• Statistical study performed on actual insured fire losses

• Relates attributes of Fire Suppression Rating Schedule (FSRS) to reduced fire claim severity

• Better community capabilities results in lower claim costs

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Overview of Statistical Study

• Data– Detailed exposure and loss data from multiple insurers

• 25 million earned house years from 2000 to 2005

– Analysis of more than 70,000 Homeowners Fire Claims• Demonstrates top-level effects of fire protection ratings

– FSRS information available for 25,000 of these claims• Used to identify the most significant attributes of these detailed

ratings

• Analysis of Fire Claim Severity Reduction– Severity is adjusted to control for the effects of other variables

such as amount of insurance, territory, deductible and others

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Top-Level Validation

• Better rated Protection Classes demonstrate lower Fire Severity

PPC vs. F ire Severity

$19,000

$23,000

$27,000

$31,000

$35,000

1-2 3-5 6-8 8B-10PPC

Adj Severity

-

10,000

20,000

30,000

40,000Claim Count

Claim Count Adjusted Severity

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Fire Station Distance is relevant at larger distances

• After controlling for PPC effect, fire severity increases at 3+ miles from fire station

• Distance to Fire Station does not significantly affect fire severity below 3 miles

Fire Station Distance vs. Severity

$19,000

$23,000

$27,000

$31,000

$35,000

<=0.5 <=0.8 <=1.2 <=1.6 <=2.0 <=2.4 <=2.8 <=3.6 <=5.0 > 5.0Distance

Adj Sev erity

0

3,000

6,000

9,000

12,000

15,000

Claim count

Claim Count Adjusted Severity

After adjusting for Protection ClassSeverity effect is flat where most exposures are

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At Risk: Strained Resources

• National League of Cities 2009 Study– 84% of cities surveyed facing unprecedented

fiscal woes – 92% stated freezes/layoffs were implemented or

planned

• Many locales in “municipal economic crisis”

• Emergency responders not spared in many cases – layoffs, furloughs, closed stations

• ISO actively engaged in evaluation of issues

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USFA – Fire Service Needs

• An estimated 128,000 firefighters, most of them volunteers serving in

communities with less than 2,500 population, serve in departments that are

involved in structural firefighting but have not certified any firefighters to

Firefighter Level I or II.

• Roughly 17,300 fire stations (36% of the estimated 48,400 total fire stations) are

estimated to be at least 40 years old.

• Using maximum response distance guidelines from the Insurance Services Office and simple models of response distance as a function of community area and number of fire stations three-fifths to three-fourths of fire departments have too few fire stations to meet the guidelines.

• Roughly half (49%) of all engines are at least 15 years old.

• Among fire departments protecting communities with less than 2,500 population, at least 14% of departments are estimated to have no ladder/aerial apparatus but have at least one building 4 stories high or higher in the community.

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USFA – Fire Service Needs, Ohio

• An estimated 16% of fire departments are involved in structural firefighting but have not formally trained all involved firefighters in those duties.

• 44% of all engines are at least 15 years old.

• An estimated 42% of fire departments do not have enough self-contained breathing apparatus (SCBA) to equip all firefighters on a shift.

• An estimated 6% of fire departments do not have enough personal protective gear.

25


Fireman’s Fund 3/09 Survey – Economic Crisis

• Top three needs of Fire Departments:

– Lack of budget

– Old or outdated equipment

– Staffing, recruiting, retaining members

• More than half said fund raising/grant writing had to increase

• 55% stated if economic issues continue for another 12 months, will result in negative effects on ability to serve

• 57% of volunteer dept.’s losing members to look for jobs

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• Economic hardship trickle-down effect: potential local issues related to budgetary woes

– Ashland, Cincinnati, Columbus, Dayton, East Liverpool, Elyria, Fostoria, Franklin, Garfield Heights, Grand River, Greenfield, Hamilton, Lakemore, Lakewood, Mansfield, North Olmstead, Parma, Shaker Heights, Sylvania, Tallmadge, Twinsburg, Warren, Xenia

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Meanwhile…

• Fire departments respond to fires once every 20 seconds; structure fire every 59 seconds

• HO fire losses account for 58% of total insured fire losses

• CMP and CF each accounted for 21 % of total insured fire losses

• Number of structure fires increased in last three years

• Suspicious car fires up 27% in one year (2008-9)• Arsonists destroyed nearly $900 million in insured

property and killed 295 civilians nationwide in 2007

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Fire Chiefs Opinion Poll

Poll highlights

• Fire departments faced with challenges in staffing, recruiting, and training of firefighters and access to sufficient water supplies

• Risk of falling below national standards

• Adverse effect on efforts to save lives and reduce property loss

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Issue: Responders Needing Help

30


Issue: Maintaining Adequate Staffing(Volunteer/Combination Fire Departments)

31


Issue: Adequate Water for Firefighting

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Issue: When Fire Protection Levels Decline

• ISO aggressively monitors changes in protection levels

• Many examples of operational/fiscal woes and growth issues exist countrywide

• Number of PPC “retrogressions” pending has increased almost 20% in one year

• ISO works directly with affected communities to assist with their action plans

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Issue: Needing Assistance

• Community-specific information and what-if assistance provided by ISO to local officials (at no charge)

• ISO on-going training and education of local officials

• State planning agency assistance

• Availability of federal grants to communities

• Mergers and consolidations of fire departments are occurring

• Sharing resources – automatic-aid agreements, mutual-aid compacts

• “Brown outs” – strategic resource decisions made by local officials – staffing, deployment, temporary station closings

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Key Questions to Ask

• How is the fire department dispatched?

• What department responds?• What equipment is sent?• How far away are the actual

responders?• How well is the department

equipped, staffed, and trained?

• Is there nearby access to water of adequate pressure and volume to fight the fire?

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Opportunity: Improvement in Protection

• Springdale, AR – A secondary means of dispatch of firefighters was added to the communications center, and the primary dispatch circuit was upgraded to fully meet the intent of NFPA 1221 for Monitoring for Integrity; another elevating platform ladder company was added to the department in-service apparatus; on-duty staffing increased; the department partnered with neighboring departments in sharing resources for a burn building and a drill tower. Result: Improved PPC from Class 3 to Class 2.

• Orlando, FL – Two new staffed fire stations put into service; on-duty staffing increased overall; a ladder company was relocated for improved coverage; enhanced hydrant -condition inspection program. Result: Improved PPC from Class 2 to Class 1.

• Hogan Township, IN – The community, which previously had no municipal piped water system, installed water mains and hydrants; training program enhanced; added engine company equipment. Result: Improved PPC from Class 10 to Class 7/9.

• Roscommon Township, MI – Improved water- hauling capability through newer tender/tanker shuttle; increased engine company pump capacity; engine company pump testing program; enhanced training. Result: Improved PPC from Class 7/10 to Class 6/10.

• Murfreesboro, TN – New emergency communications center put into service; new staffed and equipped fire stations added with engine and ladder/service companies; water system improved with additional storage capacity. Result: Improved PPC from Class 3/9 to Class 2.

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Conclusions

• Communities and their fire departments are faced with critical challenges

• Many communities are forced to make difficult decisions regarding available resources

• State of fire protection is a dynamic environment – with better and worse outcomes

• ISO actively engaged in monitoring changes in protection levels across the country

• ISO PPC program continues to provide valuable benchmarks for insurers and community officials

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ISO Field Staff Working in OhioISO Field Staff Working in Ohio

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Survey Services Field Staff Working in OhioSurvey Services Field Staff Working in Ohio

• 15 Full-time Survey Services Field Representatives in Ohio

• Average tenure with ISO – 14 years

• Average tenure in the insurance industry (including ISO) – 20 years

• Two-thirds hold college degrees

• Automatic Sprinkler Training – Delaware Technical Institute

• Staff certifications and designations (CFPS, degrees in Fire Science / Fire Protection)

• 15 Full-time Survey Services Field Representatives in Ohio

• Average tenure with ISO – 14 years

• Average tenure in the insurance industry (including ISO) – 20 years

• Two-thirds hold college degrees

• Automatic Sprinkler Training – Delaware Technical Institute

• Staff certifications and designations (CFPS, degrees in Fire Science / Fire Protection)

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Community Mitigation Field Staff Working in Ohio

Community Mitigation Field Staff Working in Ohio

• 8 Full-time Community Mitigation (CM) Field Representatives in Ohio– 6 PPC Field Reps / 1 BCEGS / 1 Flood

• Average tenure with ISO – 23 years• Average tenure in the insurance industry

(including ISO) – 26 years• 6 CM Field Reps are Volunteers / 2 Volunteer

Department Fire Chiefs• Staff certifications and designations (CFPS,

degrees in Fire Science / Fire Protection, CFM)

• 8 Full-time Community Mitigation (CM) Field Representatives in Ohio– 6 PPC Field Reps / 1 BCEGS / 1 Flood

• Average tenure with ISO – 23 years• Average tenure in the insurance industry

(including ISO) – 26 years• 6 CM Field Reps are Volunteers / 2 Volunteer

Department Fire Chiefs• Staff certifications and designations (CFPS,

degrees in Fire Science / Fire Protection, CFM)

how current issues facing fire departments affect underwriting and property risk annual meeting,...

Documents

property risk slide

ppc rating slide

protection decisions

key parts slide

current issues

better protection

property risk annual

ppc evaluation process