ISO is the acronym and trademark for the company Insurance Services Office Inc., based in Jersey City, New Jersey. ISO provides a broad range of information and consulting services to insurance companies, ranging from statistical and actuarial information to policy language to risk assessment for specific locations. ISO is perhaps best known as the company that provides ISO ratings for local fire departments, used by insurance companies to determine premiums for homeowner policies in that area.
ISO Fire Department Ratings
The system ISO uses to determine the rating of a fire department is called the Fire Suppression Rating Schedule -- a scale of 1 to 10, with 1 being the best score. This ISO rating schedule examines many factors relating to local fire departments, especially focusing on training and equipment, and also examines the locations of the fire stations in the community.
Criticisms of ISO Ratings
Some people argue that ISO ratings are problematic on several levels. Most of the criticisms relate to the fact that ISO ratings are not required to be re-evaluated over time -- although fire departments can request re-evaluations -- and that they rely on local fire departments to report any changes that might affect their ISO ratings. Critics also point out that ISO ratings do not take individual community characteristics into account, requiring, for example, that fire departments have additional ladder equipment for taller building fires in order to get a better rating even if the community does not have any buildings tall enough to require ladder extensions when fighting a fire.
Public Protection Classification (PPC) Program
ISO makes the information it collects on municipal fire departments and its ratings available to the general public through its PPC program. ISO assigns a PPC rating from 1 to 10 for each of 44,000 communities (or section of a community), and this information is available to both insurance companies and members of the community. In some cases, the investment communities make in upgrading fire-fighting facilities can be recouped in just a few years by significantly lower homeowner insurance premiums.
Other ISO Products and Services
ISO is one of the larger insurance consultancy companies in the world (a member of the Verisk family of companies), and it offers a range of other services including actuarial, underwriting and policy language consultation as well as fraud-identifications tools and other technical services.