August 24, 2001

State Senator Percy Malone has announced that he is proposing an interim study on the effects of an insurance company's recent decision to discontinue using ISO ratings when determining homeowners' insurance rates.

The announcement came during a meeting in Magnolia where firefighters, representatives of the ISO and State Farm Insurance Company, and legislators gathered to discuss the situation. Since that time, Malone has addressed concerns at a second meeting held at Hot Springs.

Until recently, all insurance companies use the ISO rating for the nearest fire department to determine rates for homeowners' insurance policies. The ISO is a national organization that rates fire departments based on a specific set of criteria, including the amount of water available to extinguish a fire, the number of firefighters available, the type and condition of equipment, and the amount of training the firefighters have. The better a department rates on the various categories, the better the ISO rating. And with better ISO ratings, homeowners' premiums typically decrease.

State Senator Percy Malone discusses the purpose of the ISO ratings with David Kirkpatrick and Danny Ormand. Ormand is fire chief at Stamps and area coordinator for the Office of Emergency Management.

State Farm has decided that they will use information from their database to determine those rates, and will no longer depend on the ISO rating.

The concern of firefighters is that State Farm's decision will cripple fire departments' ability to recruit membership and their ability to solicit donations. Those two sources of income are major factors in the continuing operation of most fire departments, especially volunteer fire departments. Currently, firefighters can offer the promise of better insurance rates in exchange for increased membership dues and additional donations.

A State Farm representative said better fire departments will continue to affect insurance premiums. If a department improves, there will be less property loss, and that will be reflected in State Farm's database leading to lower premiums. But firefighters argued that there could be years between the improvement of a department and a reflection in State Farm's database.

Malone attended the meeting to hear the concerns and questions of those involved with the fire departments. He questioned State Farm representatives on some points. State Farm representatives said an area will be divided according to zip codes. In most states where State Farm has implemented the subzone program, everyone in a specific zip code area has the same rating. In Arkansas, homeowners are also divided by whether they live inside the city limits, or outside. Malone said that is a point of concern, because a person who lives at the edge of the city limits will be rated the same as a person who lives miles from the nearest fire department.

The meeting began with a film clip of spectacular fires, plumes of smoke and waves of fire shooting skyward. And through all the situations, firefighters were walking into impossible situations, sometimes to their deaths. Arkansas ranks at the top of the list for number of fire-related deaths. That can't change unless the fire departments continue to improve and Malone said he is concerned with any move that will hamper the departments' ability to improve.

Malone has supported rural fire departments, proposing and supporting legislation to commit funding for departments.

Malone questioned Lenita Blasingame, Deputy Commissioner for the Arkansas Insurance Department, about the legalities of State Farm's decision. Blasingame said there is no legislation prohibiting the move.

State Senator Percy Malone, right, discusses the insurance issue with Lenita Blasingame, Deputy Commissioner for the Arkansas Insurance Department, and Chris Lummus, representative of Insurance Services Office, at the Magnolia meeting.

While the Magnolia meeting was designed to give concerned citizens a chance to voice concerns and ask questions, Malone said the in-depth questions and requests for information from State Farm and the ISO will come during a planned meeting with the State Legislators. That meeting of the Senate Insurance and Commerce Committee will be held on Oct. 18 at the State Capitol in Little Rock. Sen. John Fitch, chairman of that committee will preside over the meeting. Malone, a member of the committee, encouraged firefighters and others with concerns to attend.

For more information, to voice concerns or present questions, contact Malone at 870-246-4141.