State Farm is phasing out its use of an industry standard fire-protection ratings system.

At issue is the Public Protection Classification (PPC), provided by the Insurance Services Office (ISO). The PPC rates a community's fire-fighting ability by examining factors including the local fire department's staffing, training programs, resources, and even the time it takes for a fire engine to get to your house.

These fire ratings have been used by every insurance company to set rates for home insurance policies.

State Farm has decided to use its own fire rating system, where allowed by law. The new system uses State Farm’s home insurance claims data to rate a community’s fire-fighting ability. According to Kip Diggs, a spokesman for State Farm, relying on its own claims data gives State Farm a more accurate rating. 

"It's not always about fire. This isn't about ISO doing a bad job," says Diggs. "Seventy percent of what we pay in claims comes from loss other than fire — things like theft, water damage, hail, windstorms, and liability."

Diggs says the new system will allow State Farm to charge premiums that reflect the true cost of claims in a given area, and be more responsive to claims trends.

Critics of the State Farm switch argue the ISO rating has been a powerful tool to help local fire departments raise money for new equipment. Previously, fire departments could show homeowners if they invested more money in the department, the lower ISO rating would justify the initial cost through lower homeowners insurance premiums.

Christopher Guidette, assistant vice president of corporate communications for ISO, says although ISO's PPC rating "remains a viable, reliable, and accurate tool," he does have concerns about the financial impact on fire department budgets.

"Firefighters have come to depend on our ratings for a source of support when they go to their town leadership to request funding," says Guidette.

According to an ISO survey of more than 500 fire officials across the country, 92 percent found the PPC rating important when "planning for, budgeting, or justifying improvements" in their communities' public fire protection. Ninety-six percent also said they found the program important in helping the community save money on fire insurance.