Fire is a basic combination of three elements that surround us every day: heat, fuel, and oxygen. While we recognize it’s a danger, most people rarely think about fire as they go about their lives, unless perhaps they see something in the news that sparks interest.
Are people complacent because they feel protected from fire by local fire departments or know that their significant investments (house and car) are covered by insurance? Or do they simply think fire won’t happen to them because they’re careful and smart? Perhaps they are. But many fires have causes beyond a person’s control, such as a spark from a broken wire in a wall, an appliance overheating, a pilot light going out, or possibly a lightning strike.
While fire may not be on everyone’s mind all the time, fortunately it’s a constant concern of the property/casualty insurance industry. Structure fires are a leading cause of loss for insurers. The estimated loss from structure fires in 2017 was more than $31 billion.
Because the risk for loss is so high, insurers use various tools to determine fire loss potential for properties they insure. Two of these tools are from Verisk/ISO: Public Protection Classification (PPC®) and FireLine®.
Each program uniquely addresses various aspects of fire prevention and loss. Here are the very important differences between them.
PPC has existed in various forms for more than 100 years. In the late 1800s, the National Board of Fire Underwriters began a report development program that provided valuable data on the conditions in a given community. The reports included code enforcement, fire protection equipment and capabilities, water supply capabilities, and more to help inform insurers of the loss potential in a specific jurisdiction. The goal was to help insurers more effectively price fire insurance.
Today’s PPC evaluates a community’s ability to prevent or suppress fires. PPC is based on ISO’s Fire Suppression Rating Schedule (FSRS), which measures ten levels of classifications—from Class 1, meaning superior fire protection, to Class 10, indicating the community doesn’t meet ISO’s minimum criteria.
The FSRS uses nationally recognized standards to review the fire protection needs within a community and gives points based on the community’s available resources to meet those needs. The FSRS evaluates four sections that total 105.5 available points and tends to follow the general progression of fighting structure fires. Those four sections are as follows:
- Fire department: Fifty points are possible when we review the fire department itself. The assessment encompasses all fire department resources, including fire station locations, fire apparatus and associated equipment, available personnel to operate the equipment, and the level of fire training that personnel receive.
- Water resources: The water resources section accounts for 40 points. The analysis includes a comparison of buildings in the community, their flammability, and the capability of the water supply systems to provide enough water to extinguish a fire.
- Emergency communications: ISO examines the community’s ability to receive fire calls, process the information, and dispatch the appropriate fire department in a timely manner. Ten points are allotted for this section.
- Community risk reduction: ISO reviews the community’s commitment to adopt and enforce fire prevention codes using appropriately trained personnel, conduct public education about fire potential, and investigate structure fires with trained personnel. This section is worth up to 5.5 points.
A property’s PPC code is based on a thorough grading of a community’s fire mitigation efforts and the location of that property relative to station response and adequate water resources. It is not intended to provide predictive capabilities for more prescriptive conditions such as wildfire. Where specific conditions pose specific challenges, the property/casualty insurance industry turns to alternative products such as FireLine.
Wildfire is a unique peril because the environmental factors around a property influence the risk of loss. FireLine was developed specifically to address that loss potential. A study completed in 2017 found that nearly 4.5 million homes were at high or extreme risk of loss due to wildfire. FireLine assesses exposure to wildfire hazard at the address level using advanced remote sensing and digital mapping technology.
FireLine provides an objective assessment of an exposure’s propensity to burn in the event of a wildfire based on the most current assessment of three key wildfire risk factors, which are also recognized by the National Fire Protection Association (NFPA):
- Fuel: Grass, trees, or dense brush can feed a wildfire.
- Slope: Steeper slopes can increase the speed and intensity of wildfire.
- Access: Limited access and dead-end roads can impede firefighting equipment.
FireLine scores range from 0 (negligible risk) to 30 (extreme risk). FireLine also identifies properties located in Special Hazard Interface Areas—risks exposed to wind-borne embers. Additional Special Hazard Zones are available throughout the western states.
The year 2018 was an active one for wildfires in California, with the Carr, Woolsey, and Camp Fires being the most notable. FireLine categorized more than 99 percent of the Carr Fire area as at risk, with more than 90 percent at high or extreme risk. Within the Camp Fire area, FireLine categorized almost 100 percent of the acreage as at risk, with more than 70 percent at high or extreme risk. For the Woolsey Fire, FireLine categorized more than 98 percent of the area as at risk, with about 93 percent at high or extreme risk.
The right tools
Fire risk is part of daily life. For many people, it’s a threat to their largest investments—their homes and businesses. Property owners look to the insurance industry to help protect those investments, and insurers have the difficult challenge of balancing risk exposure with affordable and competitive premiums.
The tools that insurers use are the keys to developing appropriate fire insurance pricing for the potential loss. The right tools produce the appropriate premiums for the many fire risk factors. Two of the most effective tools are PPC and FireLine.
For more information, please contact ISO.