Detroit’s fire insurance blazes a trail

It’s not the kind of national notoriety Detroit wants or needs, but premiums for fire coverage are among the highest in the country and they’re climbing

Insurance News

By Lyle Adriano

Detroit, already with one of the highest insurance rates in Michigan, is experiencing yet another insurance rate hike, following a poor fire protection assessment issued by the Insurance Services Office.

It is the first time in at least 25 years that Detroit’s rating has been downgraded.

Lingering problems, such as equipment failures and faulty hydrants, have plagued the Detroit Fire Department, prompting the lowered rating and subsequent increase in insurance rates.

The rate change’s impact varies by agency and policies, but some premiums are 20% higher because of the downgrade, said Lewis & Thompson Agency Inc. president LeRoy Bostic. The average premium in Detroit is currently around $1,700 per year, compared to the statewide average of $802 (based on the last records from the National Association of Insurance Commissioners, 2012).

“We’re seeing horror stories. Premiums are skyrocketing,” Bostic remarked. “Unfortunately, it’s affecting those who can afford it the least.”

Several other insurers have followed suit, raising their rates between 5% and 10% since the change.

Newly appointed fire commissioner Eric Jones said that Mayor Mike Duggan is determined to improve the poor rating.
“Clearly, Detroit was hurt by the downgrading of the status,” Jones stated.

The Insurance Services Office classifies more than 48,000 communities across the nation based on their ability to respond to fires and save homes on a scale of 1 to 10. The lower the number, the better a community is at responding to fire emergencies.

Since the early 1990s, Detroit has had a rating of 2. In November 2013, however, it fell to 4—a score shared with Warren, Livonia and Sterling Heights.

Southfield, Washington Township, Birmingham, Troy and Dearborn all have ratings of 3.

None of Michigan’s communities have a rating of 1, but Grand Rapids and Kalamazoo are the state’s highest scorers at 2.

Ratings by the Insurance Services Office continue to apply for 10 years unless a community applies to the ISO to be reevaluated. Jones hopes to have Detroit reevaluated within a year, mentioning that the Detroit Fire Department has undergone numerous improvements in the past few years.

The fire department has, in the past two years, replaced 10 of its fire engines, invested in new gear, demolished 7000 vacant homes that had been favorite targets of arsonists, and hired 149 more firefighters, according to Jones.
 

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