Should Third-Party Oversight of Alarm Systems Be the Rule?

No one wants someone looking over their shoulders, but independent oversight is a small price to ensure the industry raises its standards.

Should Third-Party Oversight of Alarm Systems Be the Rule?

In recent months there have been articles written in industry magazines, newsletters and other media indicating that installations aren’t up to standard levels and that the industry needs to raise its standards to comply with applicable codes to reduce false alarms and have systems operate when they should and not when they shouldn’t.

While no one wants someone looking over their shoulders to make sure they are doing things properly, it’s a small price to pay to ensure that the industry raises its standards.

The primary purpose of alarm systems, both burglar and fire, in the early days was for property protection. For instance, a sprinkler system in a building would result in significant insurance premium discounts.

Having a fire alarm system to send a signal to a central station in the event of an alarm condition, resulting in a faster response from first responders and a runner (systems did not automatically reset in those days) to rewind the alarm’s transmitter would permit the Subscriber to get further insurance discounts.

It was important that these systems were installed, inspected, and maintained in a manner that the insurance company would be confident that the system would work how, and when, intended.

Why Third-Party Oversight is Important Today

So much has changed over the past century and a half. Alarm signals had been transmitted over telegraph or direct wire lines for over 100 years. Multiplex, derived channel, and ISDN were in use in the 1970s and 1980s when the switch over to radio and POTS lines changed alarm signal transmission dramatically.

And now the industry has Internet, digital cellular and VoIP for alarm signal transmission. Unfortunately, the oversight by insurance companies is not what it was and the barrier of entry to get into the alarm industry has gotten easier (which is OK) but the oversight by AHJs has become less important, which has resulted in less third-party oversight and out of control false alarms.

In the 1980’s and 1990’s the alarm industry associations at the time were not as concerned with making sure all systems and services were up to the applicable codes and standards. Some tried to promote compliance with codes and standards complying systems but there were other issues more important – like putting systems in and getting paid.

Most systems were installed properly but not requiring all systems to be done right with third-party oversight (including residential) made the entry into the alarm industry a very low bar to pass. Basically, this would result in companies that provide good systems and services to succeed and those that can’t or won’t not being penalized because of no independent oversight.


Raising the Bar for Everyone

Did requiring licensing help? Yes, it did. Licensing showed that the license holder understood how systems should be installed and serviced and that the license holder wasn’t a criminal (or had not been caught), but it DID NOT indicate that the licensed company had to install systems according to the applicable codes and standards (unless the local AHJ required it).

Unfortunately, in my opinion, the adherence to codes and standards throughout this period has changed as well – and not for the better. The insurance industry’s organizations wanted more revenue (who doesn’t) and sometimes changed their underwriting requirements to be less stringent – meaning the extent of the system to be installed and serviced wasn’t as important as in the past. The phrase that was told to me about this phenomenon was “the perfume of the premium outweighs the stench of the risk.”

So how does the industry “raise the bar” on systems being installed so that there is: a) a level playing field for all companies; b) that systems being installed and serviced are done according to the applicable code/standard; and c) use of a third party that is “neutral” (a nationally recognized testing laboratory -NRTL) such as Underwriters Laboratories (UL).

The NRTL would oversee and review or “audit” those companies and systems to ensure that the customer gets what they are paying for; the AHJ gets what they want in more systems being inspected and maintained and kept in operating order; and the alarm industry has a third party to review this.

UL is a NRTL that has been around a long time. Most insurers and local AHJs feel better – and require – that a company installing systems in their jurisdiction be UL Listed for the purpose (meaning BA, fire, etc.).

So why hasn’t the industry promoted UL (or ETL or Factory Mutual)? Customers should want (require) third-party oversight. Why? Well, would you buy a stock if the financial statements weren’t audited? Same concept.

As mentioned earlier, there is essentially a very low bar for entry into the alarm industry with regards to cost. I’m assuming that many companies do not want to deal with a NRTL due to anticipated high costs and oversight.

While companies may have a different perspective on what costs are acceptable, most probably think that any cost they are not required to pay is too much. But if the associations got their memberships to have to be listed or approved to be a member and install systems that are certificated (BA/fire and residential may have different levels of participation), systems would perform better and false alarms, one of the industry’s biggest concerns, could be drastically reduced.

Since the false alarm issue is also of significant concern to AHJs, if they could reduce the number of responses by having third party oversight of alarm companies and systems, it would be a win/win.

Some may say, “this is a nice theory, but show me the statistics.” This reasoning has been what opponents of this concept have been doing for almost 30 years when language was being put into NFPA 72 to make third-party oversight by a NRTL the standard.

The people at UL do have statistics that show systems in a jurisdiction that requires certificated systems has less false alarms than before certificated systems in their jurisdiction was required but it will take some time to get those numbers to the public. It’s important to have the correct statistics for this discussion but waiting longer to get this topic on the table and addressed has waited long enough.

Knowing the approximate costs to be listed by UL and the cost to issue a certificate indicating the alarm company will be providing service in accordance with the applicable code/standard is also a very important thing to know when deciding if the cost factor is worth it (or is not enough to stand in the way).

For fire alarm services, there are two categories to discuss. One is for central station service and the other for inspection and maintenance. In order for an alarm company to provide central station service, in this instance a local fire alarm company sending the customers’ signals to a remote monitoring facility, which is category UUFX, the initial cost to have UL review your facility would be approximately $5,000.

After the company gets approval, the annual cost for ongoing review would be about $4,500. Each certificate issued would be approximately $10 per month. For a company providing inspection and maintenance service only, which is category UUJS, the initial evaluation would be about $3,900 and the annual fees would be $3,000. Each certificate issued would also be approximately $10 per month.

Please note that the costs for the initial evaluation of a company, as well as the annual cost for review, is for each service center. If a company has five service centers providing the service, each center will have the costs of listing mentioned so the $5,000 example would cost the company $25,000. The certificate costs remain the same.

In closing, the industry will survive whether NRTL certification of alarm systems in all jurisdictions is adopted or not. However, if there is third party oversight on the companies in the industry, the dramatic reduction in false alarms, along with the extra material needed for systems and the added service revenue to be gotten, make this requirement something that the industry associations should get behind.

Richard Kleinman is the former president of AFA Protective Systems, a full-service fire and security systems provider with multiple locations spanning the entire Eastern U.S. He retired in October 2022 after almost 45 years with the company.

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