NEW YORK, July 22, 1996 — The Texas Department of Insurance (TDI) has accepted Insurance Services Office Inc.'s (ISO) multistate commercial property fire-class-rating program for use in the $2.1 billion Texas property insurance market. The program will be implemented Jan. 1, 1997.
"This is the first time there's been a general class-rating program for commercial property in Texas," said ISO Senior Vice President LeRoy A. Boison, Jr.
Insurers will no longer need to base rates on costly and time-consuming surveys of individual properties. Instead, for about half of the 850,000 properties currently individually rated, insurers can rely on ISO's estimates of future claim costs — based on classes of risks that are similar. Insurers will be able to find the appropriate loss cost for a class-rated risk directly in ISO's Texas Commercial Lines Manual instead of having to request the prospective loss cost for each property.
"The ISO class-rating program will help reduce expenses because individual property surveys will no longer be required," Boison said. When the ISO class-rating program is fully utilized by most companies writing in Texas, it is estimated that savings for those insurers will total over $2 million annually.
"Insurers will have additional substantial operating savings because the procedures we're introducing in Texas parallel those used by insurers all across the country. That eliminates insurers' costs for special Texas-only policywriting systems," Boison added.
With the changeover to class rating, ISO will also introduce its public protection classification system, which assesses municipal fire-fighting capabilities. ISO's commercial-property-rating program also includes other multistate classification factors, such as type of construction and occupancy.
Insurers that have not yet adapted their systems to use ISO's class rating, or choose not to adapt, can continue to get specific-property loss costs for all properties that are currently individually rated. They can choose between ordering from ISO the TDI schedule rate or the ISO specific-property prospective loss cost.
Both ISO's specific-property loss costs and TDI's schedule rates will continue to be available to insurers and agents online through ISO's ISOTEL network, by telephone through ISO's toll free number 1-800-444-4554 or by fax at ISO's toll-free fax number 1-800-736-3289.
ISO will continue to perform specific-property surveys in Texas for properties not eligible for the class-rating program and for insurers electing not to adopt the ISO program. In addition, ISO provides a wide array of underwriting survey services for insurers desiring more insight on property and liability exposures at locations being considered for coverage.
"The availability of ISO's class-rating program in Texas gives insurers the freedom to select the programs and systems that best meet their competitive needs and enables them to set their own time schedules for adopting the new options," Boison said.
To help insurers use the new program, ISO will offer workshops Oct. 1 in Dallas and Oct. 2 in Houston to update Texas underwriters and raters on ISO's revised commercial-property-rating procedures and to introduce class-rating for commercial property.