Sexual misconduct exposures, high value property
are concerns; captives gain market share
By Kristin Woods, CIC, AAI, CPIA, CSE
Author Kristin Woods, CIC, AAI, CPIA, CSE, is Executive Vice President of the United Church of Christ Insurance Board in Gaithersburg, Maryland.
Recently, while my husband and I were watching the sports channel, we saw an ad for a church denomination. It has not been that many years ago that attorneys began to advertise their representation on just about any subject you can imagine. But now churches are running ads. Apparently, denominations are growing and changing. So, why are we having difficulty finding open markets for church property and liability coverage?
While this is a challenging issue for agents who write churches as a niche, it is also challenging for independent agents who represent their own churches and find themselves at the trustees meeting facing down the issues of decreases in coverage, increases in price--or both.
Let's explore the church property & liability market from several perspectives. First of all, we are faced with market bias as a result of the media splash concerning multi-million dollar lawsuits for sexual misconduct. The entire church market has been painted into the landscape of potential abusers even though most churches have taken steps to protect against the possibility of sexual misconduct. Some carriers are severely reducing sexual misconduct coverage or excluding sexual harassment under employment practices liability coverage as a result of the litigation and huge rewards in some denominations.
Many denominations are taking steps to put stronger guidelines in place in the "pastor call process" as well as conducting ongoing training for those pastors already serving a church. As an example, there is "boundary training" in place within the United Church of Christ which serves as a foundation of knowledge and awareness for pastors of what are considered "appropriate actions" within their ministry.
Some carriers have withdrawn completely from writing churches; some have re-underwritten books of business, put a freeze on new business, decreased many professional liability coverages and increased prices substantially.
I recently shocked an audience when I announced that I was pleased to learn that some carriers had withdrawn from the church market. I maintain that stance today because some of those carriers have a bare-bones policy--offering absolutely no professional liability coverages. If a market is not going to provide coverages for the unique liability issues facing congregations today, it is much better for them to focus on writing other risks, such as delis or dry cleaners!
And, quite frankly, agents have a responsibility to steer a congregation to a carrier that can provide at least some of the basic professional liability coverages rather than write their church with their current carrier when the coverages are sorely deficient.
What I hear when I speak with agents who place their own church's property & liability insurance with a carrier that falls into the category of "sorely deficient" is: "My congregation wants me to write the church's insurance--to keep the insurance within the church."
However, I wonder if there were to be an action against the board, an allegation against the pastor, or an employment related claim, how would the congregation feel about its member agent upon learning that there is no coverage for any of these actions! I don't think we need to question how the courts would feel about the missing coverages--they likely would search for them in the agent's E&O policy.
I spoke with a pastor of a church that changed from a policy with employment practices and directors & officers coverage to a carrier that did not offer these coverages. The change was made "to save money in tight times." Less than six months after the church changed coverage, the congregation had a sexual harassment claim presented against it. The defense costs alone will easily exceed their premium savings 10 times over.
Captives enter the church market
The market for churches is narrow-ing, and it is changing. Captives have entered the life of the church.
I recently participated in an event hosted by a broker where denomina-tional risk managers and senior executives came together to discuss insurance concerns and different channels to address these concerns. Part of this dialogue concerned the use of captives to secure the needs of some of the guest denominations. One of the participants--the Seventh Day Adventists--has had a sophisticated, complex captive arrangement in place since 1936. Our program, the United Church Insurance Company, has been in place almost three years and another denomination signed their captive docu-ments in Washington, D.C., in March.
Captives have allowed these denominations to purchase professional liability insurance as well as property coverage through stable funding arrangements that the denomination can control. When these denominations go to the market for limits and coverages, they have a unique and passionate story to tell--they have "skin in the game"--their own.
And, other denominations will follow as captives continue to be a player in securing insurance for hard-to-place coverages.
I recently chatted with the CEO of a major denomination risk management program that had just completed the process of setting up a captive specifically so that they could continue to get liability coverage for their camps and schools. Their captive was set up entirely to provide liability coverage alone. They found themselves with no liability coverage in the middle of a policy term. Coverage had been cancelled so the captive was the most logical way to take control and get the coverages they were no longer able to find in the standard market.
Experience pays off
Let's talk about the experience an agent needs to have before writing church risks. When I recruit for independent property/casualty insurance agents to represent our denominational program, I look for three key components.
First, the agent must be technically proficient in commercial insurance. Churches can be of historical and unique construction and can own highly valued items such as stained glass windows, artifacts and pipe organs. It may be necessary to encourage the church to get a formal appraisal rather than a standard insurance-to-value calculation--an experienced agent will know and be able to communicate the difference.
It takes experience and technical competence to understand and communicate the concerns for employment practices liability, directors & officers liability, employee dishonesty, pastoral counseling and sexual misconduct. Also, the medical payments coverage is critical in the life of the church for youth events, summer camps, and sports activities. Other important considerations are the auto liability issue for volunteers and the renting of a vehicle for a church-sponsored event.
The second component is the backroom operation. An agent must have at least one full-time employee on hand to assure that when the phone rings with a call from a church, questions can be answered the same day--whether the agent is in the office or not.
The last component is the most challenging--Covenant. An agent must be willing to serve the church--over and above the end result of commission income. Churches may require the agent to present in the evening or after church on Sunday. It often takes several months for a congregation to make a decision because such decisions are made by committees and boards, and heaven only knows how much time it can take to get a consensus on any issue via a committee or board meeting!
Risk management is important for church risks--knowledge and resources can help a church avoid a liability claim. Independent property/casualty insurance agents need to bring that knowledge and those resources to the church.
A variety of good online resources are available to get insights into how decision makers in the church think and what they are concerned about. Among these are: Christian Ministry Resources at www.churchlawtoday.com; Church Executive Magazine at www.churchexecutive.com; and the National Association of Church Business Administrators' Web site (www.nacba.org). Of course, agents who are involved in their own churches can learn a lot by being involved in the church's committees.
Writing churches can be rewarding and a source of excellent, stable revenue for an agent. Don't think that the issues of sexual misconduct, employment practices and directors & officers allegations and claims will diminish. We are living in a new world today, one of litigation where our local churches are no longer immune from these risks. Instead of being naive, lead with knowledge and experience.
Don't just talk about being proactive--get involved. Research the market for stable, consistent carriers and become a part of the agent distribution system with these carriers. Garner the knowledge to be a risk management resource for your church risks. Be prepared to step away from a church risk if you don't have the best product for the church. *
The author
Kristin Woods has written numerous business articles and is the author of Sales Source Coach (www.Amazon.com). Kris can be reached at (800) 437-8830 or kwoods@insuranceboard.org.