Is the Insurance Service Office's Public Protection Classification system outdated or simply misinterpreted? What does the ISO rating really do for a fire department? Does a positive rating give a fire department false confidence?

ISO uses its Fire Suppression Rating Schedule in reviewing the firefighting capabilities of individual communities. The schedule measures the major elements of a community's fire-suppression system and develops a numerical grading based on water supply (40%), fire alarms (10%) and engine companies (50%). Departments are awarded gradings from Class 1, the highest, to Class 10, the lowest.

The Charleston (S.C.) Fire Department's Class 1 rating has raised many questions, and ISO Vice President Mike Waters spoke with FIRE CHIEF to answer them.

Waters began as an ISO field representative in 1979, evaluating communities' fire protection. Waters since has worked in several ISO offices and areas, including property survey, where information is gathered on commercial properties for fire and other insurance and liabilities.

As vice president, Waters' responsibilities include overall administration of technical standards and community mitigation areas, including public fire protection, building code enforcement and flood mitigation, as well as commercial property information-gathering for the purpose of baseline, loss costs and other rating and underwriting information.

What is ISO?

ISO is a licensed, statistical and rating organization in all 50 states. Our ISO operation today operates in 45 states around the country and the five remaining states are conducted by independent rating bureaus. The division I am in is directly involved in analysis, collection of data characteristics, and using existing rating methodologies in all those areas, commercial property [and] what we call community mitigation — fire, building code and flood.

Is ISO a privately owned company?

We are a private company and partially employee-owned and have been insurer-owned but [with] an independent board of directors.

How does ISO interact with the National Fire Protection Association and National Fire Incident Rating System?

We utilize NFPA standards extensively in our operation. If an insurance company wants detailed information on the construction, occupancy, and/or exposure of a commercial property in the [United States]… then ISO has a responsibility as a rating organization to establish baseline-loss costs; insurers are responsible to develop the final premium. We always like to point out that ISO is an advisory organization. We publish and make advisory information available to insurers, which they can use to make decisions on their own policy coverage and final premiums.

NFPA standards are an essential part of all of our activities in that one of the core responsibilities of ISO is in the property-fire area.

As far as NFIRS, in the course of our evaluation of communities, we record the number of incidents that are occurring within the jurisdiction of a community. We focus primarily on structural-fire alarms, but we also look at the total call volume at a communication center and once again utilize NFPA standards. We have access to NFIRS data for comparative purposes — it's not actually integrated into our analysis — but the number of calls is part of our assessment of the community's ability to protect itself from the fire peril.

Does ISO have any interaction with the Federal Emergency Management Agency or the Department of Homeland Security?

We actually perform in the three areas of community rating system mitigation as part of our business, where we conduct flood-mitigation evaluations. There is a group of property insurers, the Write Your Own, which are responsible and are the actual insurer of record for the flood peril. We work directly with FEMA on behalf of the WYO companies in evaluation of communities that apply to FEMA for participation in the National Flood Insurance Program. We conduct an analysis and produce that information for FEMA, which is then used by the insurers to write flood insurance.

We have been talking to the folks at DHS and a couple other government agencies recently because of their interest in ISO and the information we collect, the role we play around the country, and [our] hazard-related data. We don't have any current contracts with DHS. The responsibilities we have with flood program are with the WYO insurers and under the direction of FEMA's NFIP.

It has been said that ISO's rating system and evaluation process are outdated and ignore new technology.

I think it would be important to have in the back of anyone's mind the role of ISO and the use of our Public Protection Classification Program. We utilize a methodology known as the Fire Suppression Rating Schedule, a time-tested methodology that ISO has been responsible for administering since its formation in 1971.… [T]he reason that insurers have utilized this methodology and continue to use this methodology is because there is a direct statistical relationship between the PPC, which runs from 1 being the best to 10, which is unprotected. Because of that direct relationship, it says to insurers and to us that not only is the program beneficial to the communities and to the fire service, it is ultimately [beneficial] to those who may have their insurance positively affected by the ability of a community to protect themselves against fire. That the losses' trend, almost directly, is a predictive variable and the strength of that predictive variable to insurers means that they can make decisions based upon our assessment of what the communities are actually doing.