Happy New Year or “HNY” if you are an acronym enthusiast like my 14-year-old. All kidding aside, it sure seems like acronyms have become a part of our daily lives. Some of us drive SUVs, most of us use ATMs, and in the insurance world, we use ISO to help us determine a fair insurance premium.
ISO, or Insurance Services Office, provides insurance carriers with information, products, and services that assist us in determining your property risk— with an emphasis on fire rates for your building and business personal property. Your insurance carrier may request for an ISO representative to visit your business and gather information such as building construction, occupancy, operations, and fire protection systems.
We encourage you to embrace the process as it may have an impact on your insurance premium! Allow me to use the story about the three little pigs to explain. Remember those curly-tailed fairy tale characters? They each occupied a building made of different construction material: straw, sticks, and brick. And who could forget the big bad wolf, determined to destroy their buildings, contents, and even the poor little occupants! Even though all three faced the same risk, the pig in the brick house fared much better than his sticks or straw neighbors.
Now try to apply this story to ISO; you can see how a masonry building will likely have a different ISO rating than one made of wood. Consider if the buildings were equipped with fire protection systems such as sprinklers, alarms, fire extinguishers, and lighted exit markings. And what about the operations inside the buildings? You can imagine a welding business poses more risk than simply renting out office space. These are just a few examples of the items that are taken into consideration by ISO and then used by the insurance carrier to determine your insurance premium.
On a side note, these visits often appear to be similar in purpose to a visit by a loss control consultant. This can be confusing until you understand the difference. Both types of visits are very beneficial to you, but the purpose of ISO is to provide insurances carriers with a rating system to help them determine a fair insurance premium for your business. An insurance company’s loss control department will visit a place of business, or business property, to identify risks or hazards that may affect the well-being of the business and its operations. In short, ISO is a universal rating system insurance carriers use to determine insurance premiums whereas loss control is a benefit provided to policyholders to assist them with preventing and minimizing losses.
To gain a better understanding of ISO, please click on the image at the beginning of this article to watch a short video. And don’t forget to contact your independent insurance agent for more information regarding how to prepare for an ISO visit.