Commissioner’s Bulletin # B-0044-98

The implementation of the Fire Suppression Rating Schedule which produces the Public Protection Classifications for cities, towns and fire districts for residential property became effective on February 1, 1998. Included as part of the implementation plan for PPCs was a rule setting out a rate capping mechanism intended to cap large rate swings because of the change in rating schedules used to determine the effectiveness of public fire protection. For those cities and towns which previously had a key rate assignment, the transition to the new public protection classifications using the rate capping rule is working. However, the Department has received numerous inquiries regarding property located in areas which previously rated fringe to another first key city or town indicating residents in these areas are being penalized because the area has not been physically surveyed to establish the appropriate PPC and the areas are being assigned a PPC Class 9.

The Insurance Services Office´s inspection program is responding as quickly as possible to make physical surveys of these areas and establish the correct PPC classification for the area. Many of these areas which have some fire protection services and water distribution systems, were unknown to the Department and to ISO prior to the implementation of the new PPC classification system. In the meantime, policies renewed on or after February 1, 1998, used the PPC 9 assigned for these areas. Because many of these areas were unknown to the Department and to ISO at the time of the implementation of the new PPCs, and in fairness to insureds located in fringe areas that may have had fire services available and water systems in place at the time of the implementation of the PPCs, the Commissioner has approved a PPC of 7/9 pending the actual physical survey of each of these areas to determine the applicable PPC to the area. The PPC 7/9 classification assigned to an area means a PPC 7 is applied to a risk within five miles of a recognized fire department and within 1,000 feet of a fire hydrant; and a PPC 9 is applied to a risk over 1,000 feet to a fire hydrant but within five miles of a recognized fire department. The PPC of 7/9 is effective February 1, 1998, for the areas named in the attached Exhibit 1. Following a physical survey of each of the areas, ISO will assign the applicable PPC to each of the areas.

The fringe areas shown in Exhibit 2 have previously been assigned a PPC of 7/9 by ISO, with various effective dates. Because these areas were also fringing to first key towns with fire services and water distribution available in these areas, and in fairness to insureds located in these areas, the Department is requesting the recognition of the PPC-7/9 for those areas effective February 1, 1998.

Insurers are requested to amend any policy issued on and after February 1, 1998, or on and after the effective date of the individual insurer´s filing of benchmark rates if the filing was effective later than February 1, 1998, to reflect the correct premium for the approved PPC 7/9 for any risks located in an area named in the attached Exhibit 1 or Exhibit 2. Insurers may use the most reasonable and economically feasible method of correcting policies to reflect the correct PPC and in providing any necessary return premium to the insureds.

Application of the PPC 7/9 on an individual risk basis should be in accordance with manual rules contained in the Texas Personal Lines Manual and is applied as follows:

7 - Buildings located within 1,000 feet of a fire hydrant and five miles of a recognized fire department.

9 - Buildings located more than 1,000 feet from a fire hydrant but within five miles of a recognized fire department.

NOTE: Buildings located more than five miles from a recognized fire department, regardless of distance to a fire hydrant are subject to a PPC of 10.

Questions regarding this bulletin or the application of approved PPCs should be directed to Ike Williams, P.E., Assistant Chief Engineer, Texas Department of Insurance, P. O. Box 149104, Austin, Texas, 78714-9104, 512-322-2212.

Yours truly,
Alexis Dick
Deputy Commissioner
Inspection Division, MC103-1A

Exhibit 1
Exhibit 2

* - May Extend into Other Counties

* - May Extend into Other Counties