State Farm Insurance has issued a statement regarding its reliance on ISO ratings to determine premium rates for fire insurance. This subject came up briefly during last Thursdays aldermanic budget work session. Fire Chief Mick Schwent provided the news release and accompanying comments late this morning. State Farm Insurance Co Releases Statement on ISO Ste. Genevieve – With the controversy surrounding ISO and State Farm Insurance, Fire Chief G. Mick Schwent has asked the company for a statement on the issue. The request was forwarded to the company by local State Farm Agent Jim Francis and the following statement was provided. ISO Media Statement from State Farm: About 12 years ago, State Farm eliminated the ISO Public Protection Class in calculating the cost of homeowners and other types of property insurance. We use our own method of rating. This allows us to better match what a household’s premium should be based on that household’s risk. By using our own loss experience, we are able to reduce operating costs and improve our ability to respond to claim trends within a particular area. State Farm values a community’s capability to provide fire protection to help protect our policyholders’ homes. Better fire protection may contribute to improved loss experience, which may help with future premium level needs. However, premiums also reflect the expected costs for other types of losses such as theft, water damage, wind, hail, and liability. Our rating is based on the local experience for all types of insured losses. We can’t get into detail about our method, because it’s proprietary. Chief Schwent explains that there are two parts to the State Farm controversy. The first is that State Farm does not use the ISO Rating schedule. This is true and all Fire Departments know this. State Farm has their own proprietary method of rating properties. The second part of the controversy is derived from the first in that because State Farm does not use the ISO Rating schedule, it is assumed by some people that their insurance premium will not go up if the City loses its ISO rating. The Fire Chief would like to point out that the statement provided is a carefully worded legal statement from the State Farm Public Affairs Department. Nowhere in this statement does it say that your insurance premium will not go up if the City loses its ISO rating. As a matter of fact Chief Schwent interprets the statement this way. The first paragraph says that State farm used their own method to “better match what a household’s premium should be based on that household’s risk”. Most all other insurance companies use ISO along with their own internal methods to do the same thing. The last paragraph says that your premium is also effected by “other types of losses such as theft, water damage, wind, hail, and liability”. All other insurance companies do pretty much the same thing. Chief Schwent says the middle paragraph is the kicker. If, “Better fire protection may contribute to improved loss experience, which may help with future premium level needs”, then the opposite “may” be true as well, a reduction fire protection may contribute to a poor loss experience, which may affect future premium levels. In a City Budget Work Session held on Thursday Aug. 7th, Alderman Joe Prince after being questioned by Mayor Greminger stated that upon talking to the Missouri Insurance Commission, they stated that if the City loses its ISO Rating, “insurance companies would have a Green Light to raise rates”. (This can be seen on Ste. Gen. TV at the end of the work session video.) Chief Schwent would like to encourage all residential and commercial property owners to call your insurance company and find out for yourself.
Posted on: Sat, 09 Aug 2014 16:58:47 +0000
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