December 14, 2001

For Information Contact:

Senator Percy Malone 870-246-4141

LITTLE ROCK- State Senator Percy Malone of Arkadelphia is the sponsor of a study now before the legislature seeking answers as to why homeowners' insurance rates may be rising.

Malone's Study Proposal 2001-42 authorizes a review of a decision by State Farm Insurance Company to abandon a well-recognized rating formula in determining how much homeowners pay for insurance. The decision could impact Arkansas fire departments and their ability to buy new equipment.

The Insurance Services Office rating is a system used to measure fire departments. For example, Class 1 is excellent, and Class 10 is poor. Fire departments lower their ISO rating by decreasing response time, acquiring better equipment and making sure they have an adequate number of well-trained firemen. When a fire department achieves a lower ISO rating, the homeowners' insurance premiums in that community will decrease.

"Many fire departments rely on the ISO ratings to encourage property owners to become members of their departments," Malone said. "Fire departments have questions about State Farm's decision not to follow ISO's System and we're trying to find answers. State Farm has its side of the story and I think the legislature's obligation is to try and work this out."

At a meeting of the Senate Insurance and Commerce Committee, Malone, a committee member, asked State Farm to explain why they did not want to be a part of the ISO ratings system. State Farm officials said they preferred a rating system from within their own company and that rates statewide would not be drastically affected.