A10
ADMINISTRATIVE REPORT
Date: January 8, 1997
Dept. File No. fuscr.wpd
C.C. File: 3651-1
TO: Vancouver City Council
FROM: Fire Chief/General Manager, Fire and Rescue Services
SUBJECT: Evaluation of Vancouver s Commercial Fire Insurance
Classification
INFORMATION
The General Manager of Fire and Rescue Services submits this report
for Council s INFORMATION.
COUNCIL POLICY
On August 31, 1994, Council approved the distribution of a Request for
Proposal for a comprehensive review of the Vancouver Fire Department s
deployment of emergency staff and equipment. The review was also to
include an unofficial assessment of the anticipated fire insurance
classification for commercial fire protection based on the Fire
Underwriters Survey.
On July 5, 1995, Council authorized the General Manager of Fire and
Rescue Services to enter into a contract with TriData Corporation for
management and consulting services for a deployment study and evaluation
of Vancouver s commercial fire insurance classification.
On April 25, 1996, Council endorsed, in principle, a Fire and Rescue
Services apparatus and staff redeployment proposal known as Option 6"
as outlined in the TriData Study. Council also directed the General
Manager of Fire and Rescue Services to report back with a detailed
implementation plan for the proposed redeployment of fire apparatus and
staff.
SUMMARY
A formal survey of the existing municipal fire protection of the City of
Vancouver by the Fire Underwriters Survey would likely result in a
reduction in the previous Class 1 rating (obtained in 1980) to a Class
2. The effects on commercial fire insurance rates due to this reduction
in classification are believed to be minimal.
A Class 1 rating can be maintained by implementing specified
improvements in training, carrying out annual testing of pumps and
aerial devices, implementing the proposed redeployment (Option 6 of the
TriData report), and equipping new apparatus to offset deficiencies for
inadequate equipment on existing apparatus. Some of the suggested
improvements have already been implemented or have been initiated. The
detailed implementation planning for Option 6 is well underway, with a
report to Council scheduled for the first quarter of 1997.
PURPOSE
The purpose of this report is to present the final results of a
consultant review of the anticipated fire insurance classification of
the City of Vancouver.
BACKGROUND
Vancouver was last independently reviewed by the Fire Underwriters
Survey (FUS) in 1980. At that time, the Department received a Class 1
commercial insurance rating. The Class 1 rating is the highest rating
achievable under this system, and Vancouver is currently the only
Canadian City rated as Class 1. Most large cities are rated as Class 2
or Class 3. In North America, very few cities reach the status of Class
1 and it is unusual for cities over 200,000 populations to be graded as
Class 4 through 10.
In an April 25, 1996 report to Council, the General Manager of Fire and
Rescue Services reported the results of the (TriData) review of the
deployment of emergency apparatus and staff and the initial predicted
findings of their simulated fire insurance classification evaluation.
The consultant concluded, based on an initial evaluation, that a formal
survey by the Fire Underwriters would likely result in a downgrade of
Vancouver s current Class 1 rating to a Class 2.
In a letter dated July 8, 1996, the Fire Underwriters Survey advised the
City of their intention to carry out an official survey of the municipal
fire protection of the City of Vancouver between September and November
of 1997.
DISCUSSION
The following discussion quotes the final Public Fire Protection
Classification Grading Report prepared by TriData Corporation for
Vancouver Fire and Rescue Services. The full report is on file in the
City Clerk's Office.
The Grading Schedule used by the FUS was devised as a tool to assist in
setting fire insurance rates for each community. This evaluation of the
fire defences of communities is used to assist member insurance firms in
establishing fire insurance rates. Fire insurance rates for commercial
properties are partially based on the level of public fire protection
that is provided in each community. The fire risk characteristics of
individual properties and historic loss experience for the loss area and
for similar properties are also considered by most insurance companies
to establish premium rates for fire insurance. It should be noted that
fire insurance premiums form only a portion of the total insurance costs
of a property. Other components of the total insurance costs include
general liability, earthquake, business interruption, and insurance for
other risk factors.
The evaluation of fire defences is expressed as the City s public
protection classification, which is rated on a 1 to 10 scale. Class 1
represents the highest level of fire protection, while Class 10
represents the absence of any effective public fire protection. The
grading process evaluates a city s fire suppression and control
capabilities. It considers the operational capabilities of the Fire
Department, the availability of an adequate and reliable water supply
for fighting fires, and the systems that are in place for receiving and
handling fire alarms.
This fire insurance grading system was not intended or designed as a
guide for fire protection decisions, although many cities attempt to use
it in that way. Therefore, it should be noted that the FUS fire
department rating should not be the sole source of evaluative
information on a fire department. Although useful as one source of
information about a fire department, community interests and those of
the Grading Schedule do not necessarily coincide. The Grading Schedule,
for example, is directed primarily toward preventing property losses.
Deaths and injuries are also prevented as a result of this concern, but
they are not the foremost consideration. The Fire Suppression Rating
Schedule does not address emergency medical or rescue services and does
not directly address fire prevention, code enforcement, public fire
safety education, organizational efficiency, and many other important
factors considered in a total evaluation of a fire department. In
addition, it has been impossible to determine what real financial impact
the rating has on local insurance costs compared to the sometimes
significant costs of improving the rating.
A classification or grading study is conducted every 10 to 15 years in
most Canadian cities. Since Fire and Rescue Services was to undergo a
comprehensive deployment review (TriData), it was considered an
opportune time to carry out a simultaneous (although unofficial)
evaluation of the anticipated fire insurance classification. An estimate
of the resources required to either maintain or achieve a Class 1
rating (if that is ultimately Council s wish) could then be carried out.
We have been informed by the Fire Underwriter s Survey that they intend
to officially review Vancouver s rating in late 1997.
TriData s classification was based on the Fire Suppression rating
Schedule developed by the Insurance Services Office (ISO)/Commercial
Risk Services Inc. in the United States. The Canadian FUS uses a very
similar rating system, however it may not be identical in all respects.
Although the grading process is influenced by subjective
interpretations, the actual evaluation should come very close to the
results predicted by the TriData study. According to the consultant, the
degree of variation that may occur through the official process in 1997
is not likely to change the overall predicted classification.
The grading process was conducted by applying the ISO rating schedule to
the Vancouver Fire and Rescue Service as it existed during 1995 and
early 1996. In addition to estimating the grading classification for the
existing organization, an attempt was made to identify changes and
improvements that could be made to improve the grading classification. A
second evaluation was then conducted, using the proposed resource
deployment known as Option 6". O ption 6 was the plan that was
recommended and accepted (in principle) by Council as a result of the
TriData project for the future redeployment of the Vancouver Fire and
Rescue Service.
Grading Results
The application of the Fire Suppression Rating Schedule to the existing
resources of Vancouver Fire and Rescue Services concluded that Vancouver
would achieve a Class 2 rating under the current grading schedule. The
initial evaluation gave Vancouver 80.65 points out of a theoretically
possible 100 points. This is within the range for Class 2, but near the
bottom of the range. A Class 1 rating requires a minimum of 90 points.
Areas for Improvement
In the current evaluation the fire alarm and water supply categories
both came close to their maximum possible scores. The simulated grading
revealed a number of weaknesses in the current organization and
operations that could be addressed to quickly and affordably improve the
grading score. It was found that an increase of approximately 7.58
points could be achieved by making specific improvements in two areas.
This would include conducting annual pump tests of all major apparatus
and making significant improvements in training facilities, programs,
and record keeping. The enhancements in training are planned and some
have already been implemented. The pump testing will also be implemented
in the near future when the testing facility is completed (currently
under construction).
While improvements in these two areas would improve the point total (to
88.23), they would not yield enough points to improve the net score from
Class 2 to Class 1.
The cost of an improvement to Class 1 with the existing resource
deployment was estimated by determining the minimum on-duty staffing
that would be required to gain 1.8 additional points (to achieve 90
points), assuming that the personnel would be assigned to existing
engine and ladder companies. The minimum on-duty staffing for each shift
would have to be increased from 131 to 155, which would provide a
minimum of 4 personnel for each existing ladder and rescue company, plus
a fifth crew member for 11 companies. To implement this change,
approximately 120 full-time positions would have to be added at a cost
of almost $7.2 million annually. The consultant noted that this does not
appear to be a cost-effective approach for Vancouver s present
situation.
Revised Deployment Plan (Option 6)
The grading was also recalculated with the recommended changes in
staffing and deployment that would occur under Option 6, the plan
recommended to the City by the Project Steering Committee and the Fire
Chief. Only areas related to fire department operation were
recalculated; the sections related to water supply and communications
were not changed.
The grading of this plan included several assumptions:
1. The recommended improvements in training would be fully
implemented.
2. The annual testing of pumps and aerial devices would be maintained.
3. The recommended apparatus replacement program would be implemented
and the new apparatus would be in service.
4. The new apparatus would be well equipped to offset deficiencies for
inadequate equipment on the existing vehicles.
5(a) In fire halls with two companies, one would be designated as an
engine company, while the other would be designated as a ladder
company.
5(b) In single company fire halls a quint would be counted primarily as
an engine company. Partial credit for ladder company service is
allowed by the grading process.
This calculation indicates that a score of 92.39 points could be
achieved with the recommended deployment. A Class 1 grading would be
achieved with this score.
SOCIAL IMPLICATIONS
The insurance grading process infers that there is a predictable
relationship between the cost of providing a particular level of fire
protection and the cost of fire insurance. The more significant factor
would be the net change in total cost to the community, which includes
insurance premiums, insured and uninsured losses, fire department
expenditures and the cost of built-in fire protection.
It might be assumed that increased expenditures to provide public fire
protection will lead to lower insurance premiums and to reduced fire
losses, deaths and injuries, but it is impossible to calculate an actual
cost/benefit ratio. The cost that would be involved in bringing the Fire
Department up to a particular class can be estimated; however, it is not
possible to calculate the difference in insurance premiums that would
result from a change in the public protection classification or the
impact on fire losses. The difference in premiums between Class 1 and
Class 2 should be approximately 2 percent, although many insurance
companies use the same basic rate structure for both classifications.
The classification is only intended to be used for non-sprinklered
commercial properties. Residential properties are usually covered at a
uniform rate and buildings protected by automatic sprinklers are usually
rated on a separate schedule. The actual cost of insurance is influenced
by many other factors, including loss experience, governmental
regulations, competitive practices, group rates and multi-risk packages.
The rate structure also varies with the occupancy classification of each
property, the construction of the building, and other factors. The
impact of a change in the protection class would have to be evaluated
for each individual policy.
The 1 to 10 scale does not represent incremental steps in the
recommended fire insurance rates. The differences between successive
classes tend to be quite small, except for the steps from Classes 3 to
4, 8 to 9, and 9 to 10. The intermediate levels are often grouped
together when basic rates are established.
Reducing the level of fire risk in the community, by eliminating high
risk occupancies and installing automatic sprinklers, appears to have a
more favourable impact on the total cost equation than increasing the
level of public fire protection. The grading process does not consider
the significant reduction in Vancouver s level of fire risk since the
last grading or the reduction in fire losses.
PERSONNEL IMPLICATIONS
There are no direct implications for Fire and Rescue Services personnel
as a result of this report. There are also no impacts to personnel due
to the recommended improvements to training and annual testing that have
already been implemented. Any personnel implications will be reported
as a result of the apparatus and staff redeployment proposal (TriData
Option 6) that Council adopted in principle on April 25, 1996.
Council directed the General Manager of Fire and Rescue Services to
report back with a detailed implementation plan for the proposed
redeployment. This report will be forthcoming within the first quarter
of 1997. That report will provide all personnel implications.
FINANCIAL IMPLICATIONS
At this time, there will be no financial implications for this report.
Recommended improvements to training have already been planned, funded
and are being implemented. Facilities for annual testing of pumps are
under construction at the new Fire Training Facility, so no new funding
is required.
Funding requirements for the apparatus replacements required as part of
the implementation portion of TriData Option 6 will be included in a
forthcoming report. It is anticipated that apparatus will be funded
through the established plant account.
IMPLEMENTATION AND COMMUNICATIONS PLAN
Changes and improvements suggested by the consultant will be implemented
prior to the expected official grading study to be carried out by the
Fire Underwriters Survey during the fourth quarter of 1997. The formal
results of the FUS grading will be reported to Council when they become
available.
Detailed implementation plans for TriData Option 6 will be reported to
Council during the first quarter of 1997. * * * * *