Detroit Home Owners Insurance Sky Rockets, Detroit’s ISO Jumps From 2-4

Detroit Fire Department_ISO_ Insurance RatingArticle from detroitnews.com explains why business’ and home owners insurance rates are skyrocketing after Detroit ISO rating jumps from a 2 to 4 this year. Full article below:

Chronic problems at the Detroit Fire Department are catching up to homeowners in the form of higher insurance rates.

Detroit already has the highest rates in the state. Now, they’re rising again for many, after a group that analyzes communities’ fire protection for insurance companies downgraded the city. It’s the first time the firm, New Jersey-based Insurance Services Office, has changed Detroit’s rating in at least 25 years.

Tyrone Carter of southwest Detroit said his homeowner policy jumped last month to $1,749 per year from $1,076. The company cited the change in ratings.

“I understand rate increases, but that much? I couldn’t believe it,” asked Carter, a retired Wayne County sheriff’s lieutenant. “After all these years and all these fires, now it’s changing?”

The impact of the rate change varies by agency and policies, but some premiums are 20 percent higher because of the downgrade, said LeRoy Bostic, president of Detroit-based Lewis & Thompson Agency Inc. Already, the average premium in Detroit is about $1,700 per year. Statewide, it was $802 in 2012, the last year records were available from the National Association of Insurance Commissioners.

“We’re seeing horror stories. Premiums are skyrocketing,” Bostic said. “Unfortunately, it’s affecting those who can afford it the least.”

Other insurance agencies surveyed by The Detroit News indicated rates increased between 5 percent and 10 percent after the change.

Eric Jones, who was confirmed last week as fire commissioner by the Detroit City Council, said Mayor Mike Duggan is committed to improving the rating.

“Clearly, Detroit was hurt by the downgrading of the status,” Jones said. “The mayor made it one of my highest priorities. … It’s huge.”

The Insurance Services Office ranks about 48,000 communities nationwide on their ability to respond to fires — and save homes — on a scale of 1 to 10. The lower the number, the better the protection.

Since at least the early 1990s, Detroit has had a 2 rating. In November 2013, it went to 4, the same as Warren, Livonia and Sterling Heights.

That’s below departments such as Southfield, Washington Township, Birmingham, Troy and Dearborn, all of which have 3 ratings.

No communities in Michigan have a rating of 1, which is considered elite. Only two, Grand Rapids and Kalamazoo, have ratings of 2.

The ratings remain for 10 years unless communities apply to the ISO to be re-evaluated. Jones said he plans to do so within one year, noting the Detroit Fire Department has made numerous improvements in the past few years.

After struggling for years with equipment problems and malfunctioning hydrants, Detroit in the past two years has replaced 10 engines, invested in new gear, demolished 7,000 vacant homes that were targets for arsonists and hired 149 firefighters, bringing its total staff to 852, Jones said.

“It’s not the same department,” Jones said. “In short order, without being too overconfident, we will be able to get better ISO assessments.”

By any measure, fire has been a Detroit problem for decades.

Last year, fires caused $229 million in damage in Detroit, nearly half of the $514 million in damage incurred across the state, according to National Fire Incident Reporting System, the data-collection arm of the Federal Emergency Management Agency.

Fires, burglaries raise rates

Along with burglary, fire is among the reasons Detroit has the highest homeowner insurance rates in the state, said Eric Huffman, who owns a State Farm agency near New Center.

The Insurance Services Office would not comment on why it lowered Detroit’s rating. The months-long process evaluates numerous factors, from equipment and communications to water pressure and dispatch times.

Ten percent of the rating is based on dispatch systems, while 40 percent is on the delivery of water and 50 percent is the fire department, according to the Insurance Service Office.

Detroit was analyzed as it entered bankruptcy in 2013. Problems with communications equipment and fire vehicles were cited by the ISO for the downgrade, Jones said.

That analysis came one year after the ISO changed its methodology. Before, the system measured capacity to fight fires. Now, more weight is given to performance, said Sterling Heights Fire Chief Chris Martin.

“It’s a more realistic reflection of the real world now,” Martin said. “Before, you would be graded on whether you had things like a hose head clamp or couplings that you might never use. Now, it’s actual response.”

Wayne/Westland Deputy Fire Chief Patrick Harder Jr. said the economy and dwindling staff have hurt departments throughout the region.

“Detroit went through the same things as everyone else: staffing cuts at the same time the volume of calls went up,” said Harder, who said his department has a 4 rating.

The Sterling Heights and Dearborn departments also are undergoing ISO reviews.

Some insurance companies rely on the agency’s rating more than others, while some larger ones including State Farm rely on their own fire data for rates, said Lori Conarton, a spokeswoman for the Insurance Institute of Michigan.

It can take several months for the ratings changes to catch up to insurance premiums, which is why some Detroit homeowners are only now seeing increases.

Price difference

Bottom line: The better the rating, the lower the insurance rates, said David Doudy, a Colorado-based consultant who works with departments to improve ratings.

“There is absolutely a price difference when ISO ratings change. It’s that important,” said Doudy, whose company, ISO Slayer, was hired as consultants for the Washington Township Fire Department and others in Michigan.

He recommended a “playbook” for Washington Township that included making equipment purchases to help improve its rating.

When the rating improved from a 5 to a 3 this year, township officials estimated that insurance bills fell an average of $200 to $600.

Back in Detroit, Carter said he shopped around after the sticker shock. He didn’t get a better quote. Southwest Detroit has one of the highest arson rates in the city.

“I’m going to pay. It was $500 to $600 cheaper than any other rate,” Carter said.

“But this is just one more thing to consider about living in Detroit.”

JKurth@detroitnews.com

Subscribe for updates and new job announcements.

Leave a Reply