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Fire Insurance Premium Reduction

through Fire Rate Analysis

    ISO (rating bureau) Specific Rates for some buildings can be lowered by comparing the ISO rate calculations for that building with current conditions found there, and bringing them to ISO's attention, or by "cleaning up" actual on-site conditions and calling for an ISO reinspection.

    The ISO fire rate is used by many insurance companies as a basis to calculate your fire insurance or package policy premium..

    Fire insurance premium rates (the rating bureau, ISO, calls rates "Loss Costs") come in two flavors: Class Rates (rates from a manual) or Specific Rates (rates based on an ISO inspection of your building). We can't normally do much with Class Rates, other than to make sure your building is properly classified. Specific Rates, however, can be changed, sometimes radically, based on the construction, fire protection and occupancy of a building.

    How do I know if my building should be Specifically Rated (inspected by ISO) or Class Rated (no ISO inspection, rate comes from a manual)?
For Construction Class 1-2-3 (wood frame, joisted masonry or all-metal), use Class Rates from the manual if building area is 25,000 sq. ft. or less (15,000 or less if your insurance company is still using the older Class Rates. Otherwise, use Specific Rates (call for ISO inspection of building if such rates don't exist).
For Construction Class 4-5-6 (either fire resistive or masonry walls with noncombustible floors and roof), use Class Rates from the manual if building area is 5,000 square feet or less. Otherwise, use Specific Rates (call for ISO inspection of building if such rates don't exist).
If your building, any size, any construction, is fully covered by automatic sprinklers, use Specific Rates (call for ISO inspection of building).
    Implications for Policyholders:  all buildings that are fully sprinklered have (or should have) Specific ISO Rates that can be checked to see if they can be lowered);  non-sprinklered or partially sprinklered buildings may have rates subject to review, depending on size and construction as shown above.  Where premium costs are sharply increased on renewal, and ISO Specific Loss Costs are used as a premium basis, independent fire rate analysis should be considered.

    Fire Rate Analysis: 

    Purpose: get the policyholder a lower rate, either by finding errors in the present rate, and pointing them out to the rating bureau, or instructing the insured in what practical measures to take to qualify for a better rate. Or, if we find "bad" on-site conditions that can't be changed, and the present rate doesn't take these into account, advise you not to disturb the present rate. Here's what's involved:

    Fire Rate Analysis is available for buildings located anywhere in the U.S.  First, order the present rate makeup (known as SPECIFIC PROPERTY SURVEY REPORT) for the building from ISO. For sending a copy of this, ISO presently charges $48 for a non-sprinklered building, or $81.00 for a sprinklered building. Important: when ordering from ISO, always specify that you want the SURVEY DETAIL for each building, as well as the A.S. Grading Sheets for each sprinklered building.  ISO has various other types of reports for your building (such as their Underwriting Report) that I find less helpful in working on rates.

    Free Initial Review: As time permits, if you want to send me your ISO SPECIFIC PROPERTY SURVEY REPORTS and A.S. Grading Sheets, I will review them and tell you whether I think there is any possibility of getting a rate reduction. There will be no charge or obligation for this service.

    If you want to retain my services in helping you get a lower premium rate (I won't work for you unless I think it's possible to lower your rate), my fee is based on size/complexity of the building and its rate makeup, and will be similar to the cost of an insurance appraisal. For those who prefer, a contingent fee may be available.

    If hired, I inspect the building, with its ISO Rate Schedule in hand, and look for anomalies in the rate that we can use to the policyholder's advantage in obtaining a new ISO rate. On site, I check such things as construction classification, square foot area, occupancy classification, fire walls that could be used to "divide" the building or reduce the Area Charge, credit for alarms and sprinklers, conditions known as Extra Hazards, and everything else that effects the rate for this building.
    If I've found that existing conditions (or conditions that will exist if the policyholder follows my instructions) at the building will result in a lower rate if we order an ISO reinspection, I will have ISO do a tentative rate estimate, so the policyholder can anticipate what his premium savings will be before anything is done. For this estimate, ISO charges $51* for a non-sprinklered building and $88* for a sprinklered building.
    When I've gotten ISO's tentative rate, I'll write a report that tells you what (if anything) has to be done to the building to prepare for ISO inspection, and compare the current rate with the estimated rate after ISO reinspection.
    Next, I call for an ISO inspection, as soon as the policyholder confirms the building is inspection-ready (if he had to make any changes). The ISO charge for this inspection will be $17.70*, sprinklered or non-sprinklered.
    After ISO's inspection is complete, ISO will send me the new rate, and I'll send it on to the policyholder and/or his agent.
    All ISO fees are the client's responsibility. 
        *ISO service fees quoted above are approximate and subject to change-call ISO for their current charges.


Summary of Fire Rate Analysis:
Get current ISO rate schedule and A.S. Grading Sheets for property
Send it to me, I'll review it and tell you if I think a practical reduction is possible
If engaged, I inspect building, do preliminary rate calculations, have ISO do a tentative rate
I write report describing what will be done (or what needs to be done) to reduce the rate
When policyholder tells me he's ready, I call for ISO inspection
ISO sends me the new rate, I send it to you and your agent, your agent sends it to the insurance company for a Return of Premium, and, normally, the case is closed
If the new rate is not what we expected, I'll go back to ISO to see what can be done to get it corrected.


    Although I can't guarantee results, I never accept a case where I don't see the possibility of a rate reduction achieved through practical means. Working carefully, so as not to provoke a rate increase instead of a decrease, I have reduced many rates since I began business as an independent fire rate consultant in 1972.
    If anyone prefers to have me work on a contingent fee basis, I will be happy to accept such cases on a selective basis. My fee will be 50% of one year's (365 days) premium savings, plus travel expenses (.32 per mile, tolls & parking for local sites [my local area is NYC to Washington DC],  or travel expense elsewhere, plus all ISO fees described above).

--Clay Mikolasy, Fire Rate Analyst

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C Mikolasy 2007