Frequency of PPC® grade changes in the United States
Almost 9 percent of nearly 200,000 random addresses experienced a PPC change. Insurers that monitor those changes are at a competitive advantage.
Public Protection Classification (PPC®) codes aren’t static. Based on a Verisk analysis of nearly 200,000 random addresses in the United States, almost 9 percent of those locations had a different PPC in June 2013 compared with June 2012. And almost 65 percent of communities surveyed between 2010 and 2012 experienced a PPC change.
PPC codes change for millions of properties each year for a variety of reasons, including fire department changes such as station openings and closings, changes in personnel, and changes in training; additions to water supply capabilities; and more. To keep track of those changes, ISO, a member of the Verisk Insurance Solutions group at Verisk Analytics, employs a national field force to survey fire protection and suppression capabilities for more than 47,500 communities nationwide.
Our research reveals that relying on manual PPC assignment methods or not refreshing PPC codes may lead to a 20 to 30 percent PPC misclassification rate in as little as three years. In fact, based on more than 60 tests with 51 carriers between 2004 and 2013, the average PPC misclassification rate for insurers employing such methods was about 33 percent — with the majority of those policies underclassed (a less favorable grading). Insurers that regularly monitor PPC changes and update policies accordingly are at a clear competitive advantage by offering more accurate risk pricing.