HolyCoast: What Your Church's Insurance Agent Doesn't Want You to Know
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What Your Church's Insurance Agent Doesn't Want You to Know

UPDATE: I've created a new blog just for church insurance issues, stories from my days in the church insurance business, and advice for supervisors on how not to manage people the way the church insurance business was managed. You can find it at Insurance for Churches.

(NOTE: I wrote this piece in an effort to pass on some valuable knowledge I accumulated during nearly nine years in the church insurance field. I figure there are some church administrators and board members who could use this and might stumble across it while searching the net for information.)

Do you really know your employees?
NOTE 2: A 30 minute internet radio broadcast of this information is now available at HolyCoast.com ON THE AIR . It includes additional stories and examples not included in the printed version. You can listen to the broadcast at the link, or download it to your computer or iPod so it can be shared with your church staff or other pastors or leaders who could benefit from this information.
I’m your church insurance agent’s worst nightmare. Now, why would a guy who usually writes and talks about politics want to do a post about church insurance? Well, my friends, it’s difficult to admit this, but I am a recovering church insurance agent. Yes, I’m sure you admire the courage that it took for me to admit that, but for nearly 9 years I worked for one of the largest church insurers in the country.

During those years I handled everything from little bitty start up congregations with 20 people meeting in a school cafeteria, to a 7,000 member megachurch with tens of millions of dollars worth of buildings and property and every activity known to man. I had conservative Baptist churches, Pentecostal churches, stuffy Presbyterian churches, mysterious Asian religions, a couple of mosques, independents of all types, and a fair number of cults. If you were a 501(3)c church and you weren’t burning witches at the stake, weren’t witches yourself, or weren’t passing out snakes during your Sunday services, our company would probably insure you.

During my countless hours on the road I often thought that if churches knew what I knew about the various pricing tricks insurance companies use to mysteriously find savings when a competitor comes calling, my life as an agent would be a lot tougher and churches would be paying a lot less in premium. I decided that if I ever found myself in a position where I could counsel and advise churches on this subject, I’d give them that information their agent doesn’t want them to know and help them keep more of their money for ministry and help them spend less on necessary evils like insurance.

When I entered the business I was na├»ve enough to believe that two identical churches in the same town with similar activities and loss history would probably have two very similar premiums. Not so. In fact, there could be a dramatic difference between the premiums paid by both churches, and what I’m going to show you here is how to make sure you’re taking advantage of the pricing options the insurance companies have that they don’t want you to know about.

Let’s get one thing clear at the beginning: Church insurance is not a ministry. It can help support you as you perform your ministry, but the companies are not providing coverage as a charitable act. Insurance is a business and the company’s goal is to extract as many dollars from your ministry as possible while paying out as few as possible in claims.

Now, before I go any further, let me just say that I’m not trying to imply here that the church insurance business is more unsavory than any other insurance business. You’ll find these same things going on with any insurance company. However, churches tend to put more trust than they should in church insurance companies just because they work primarily with churches. That trust will cost you a lot of money.

If an agent walks into your office carrying a Bible, throw him out! It’s an act designed to disarm you, and just because he carries an 18 pound gold embossed King James Bible with the original Greek and Hebrew manuscripts, doesn’t mean he still isn’t out to get your money. He may be a good guy, and may even be a dedicated Christian, but as your agent, the two of you are in a business relationship and you have to remember that

The larger church clients of mine often had full time staff members who served as administrators. These people were sometimes pastors with administrative backgrounds, or lay administrators with business management backgrounds. I enjoyed working with professional administrators since they had a great deal of knowledge about the subject and understood the importance of proper coverage. They could also be challenging, thanks to their business savvy and concern for the bottom line.

Smaller churches often had volunteer lay leaders, perhaps the pastor himself, or even the church secretary handling the insurance program. There were several occasions when I had to make a pitch to the part-time secretary who was then supposed to pass all my information on to the church board. That was usually a waste of time, and I’ll give you a suggestion regarding the proper contact person later on.

With all that having been said, here are a few rules you should take to heart when working with your insurance program:

-Don’t fall in love with your agent. You certainly want to have a good relationship with your agent since he’ll be more likely to respond favorably when you need something, but as they say, love is blind. I’ve seen churches willingly pay thousands of dollars more than they had to, and sometimes for less coverage, because they were so blindly in love with their agent. When you start to value your agent more than you value the ministry dollars you have to work with, you set yourself up for needless costs.

Your agent works for you – make him earn his money. If he brings you a box of candy at Christmas, thank him, eat the candy, but don’t forget insurance is still a business and if he isn’t competitive, you’ll spit him out like one of those chocolates with the coconut in them.

-Control your claims. You can’t help it if the little old lady falls down and hurts herself in your parking lot, but you can make sure your grounds and buildings are as free of hazards as possible. Be observant for things that can generate claims, because claims are your worst enemy when it comes to keeping your insurance costs down. Insurers assess loss ratios based on the dollar amount of claims paid versus the dollar amount in premium collected. Some also take into consideration the number of claims submitted, even if they were for small dollar amounts because there’s still an adjusting and underwriting cost associated with small claims. For the average insurance company, an account is considered profitable at anything below a 65% loss ratio. If you’re under that, the company is making money and they’re more likely to be willing to negotiate better rates for you.

For property claims, use your deductible as a guideline. If a claim situation arises that’s going to cost less than three times your deductible, pay it yourself and don’t file a claim. It will save you money in the long run. And speaking of deductibles, choose the highest deductible you can afford to pay on your own. Underwriters are more likely to grant credits on policies with high deductibles (more about credits later).

-Get competitive quotes every year. If you don’t do anything when your insurance renewal time comes up, I can almost guarantee you that your costs will go up, even if you haven’t had any claims. Sometimes that will be due to rate changes that may occur in your area, but often it’s due to company policies that dictate that they want a certain premium increase on existing accounts during that year. There were dozens of occasions when I got renewal worksheets from the company that showed a 5% increase in premium just because that’s what the company wanted. The customer hadn’t had any claims, and there weren’t rate changes in that territory. Because the church didn’t show any signs of shopping for other insurers, the increases sailed right on through. Your agent is probably paid based on a percentage of the premium you pay, so if he thinks you won’t mind an increase, he certainly won’t mind sending one your way.

So, how do they increase your rates even though there hasn't been a rate change? Easy. There's a little tool called "Special Risk Rating Credits" that can be applied to many policies that have the effect of adjusting the rates up or down according to the whims of the agent and the underwriter. There's an "official" list of reasons and allowable adjustments, such as Care and Condition of the Premises, or Management Cooperation, and each has an allowable percentage credit or debit. If any such credits or debits are applied, the agent has to complete a form to justify those changes. In theory, the agent should take that form, go down the various rating factors, and apply the appropriate credit or debit to each item to come up with the final percentage.

In reality, the agent and underwriter agree on the percentage of credit or debit they want to assess to the policy, and then work the form to justify the amount. For instance, if the agent thinks he needs 25% credit to be competitive and the underwriter agrees, he fills out the form accordingly. If the agent doesn't want to "leave money on the table", or perhaps the church is a start-up with no building and falls below the minimum desired premium, he can likewise apply a debit to the policy using the same process. If the company wants a 5% increase in premium, they just knock 5% off the credits at renewal time. There's more fiction writing done on Special Risk Rating forms than in the entire Harry Potter series. That's why it's so important to get a quote every year and keep the agent and the company on its toes.

What’s the process? Here’s what you should do about two months before your property/liability package comes up for renewal:

Contact your existing agent and request hard copy loss runs. That will do three things for you: -It will give you loss information that you can use when negotiating rates with other carriers (assuming the loss run looks good);

-It will put your existing carrier on notice that you’re shopping, and will make them more likely to sharpen their pencils a bit when calculating your renewal;

-It will make your existing agent nervous, and a nervous agent is your best friend.

You probably have a desk full of cards and mailers from other church insurers. Call them all. Two months lead time is plenty for most insurers to gather information and prepare a quote. If you have a very large church with individual buildings that would be valued at $5 million or more, you may want to start this process 3 months early since there could be some reinsurance issues that will take more time to quote.

Don't pay your bill until you absolutely have to. Your insurance won't get canceled if you don't pay your renewal bill a month early. Even if your payment is a day or two late there are regulations which prevent the insurance company from cancelling your policy on the renewal date.

I'm not advising you to pay late, just don't pay too early. The companies bill you early for a variety of reasons, but none of those are because they benefit you the customer. here's what happens when you send your money before you have to:

-You give the insurance company free money to use which they can invest and make money on, none of which will benefit you. It's better for you to keep the money in your account until you have to pay it.

-Secondly, an early payment tells the agent that the deal is done and he'll keep the business. Therefore, he doesn't need to spend any extra time and effort to try and retain your business. His work is finished.

-Thirdly, you make it more difficult in the event another agent wants to submit a bid late in the process. Usually the first thing they'll ask you is if you've paid your bill, and if you have, they may still give you a bid but they probably won't put that much effort into it since the assumption will be that the buying decision has already been made. If you haven't paid yet the agent will have more incentive to give you his best deal (especially if you follow the advice below and released all the information to him).

Keep your money in your pocket as long as you can. There's nothing like an unpaid premium bill a few days before renewal to motivate your agent to get creative in order to keep your business.

Full disclosure. This item will probably tick off the insurance industry more than anything. When a competing agent comes to your church, pull out your insurance policy, premiums and all, and let him look at whatever he wants. If he wants copies of the coverages and pricing, give it to him.

Why? If an agent knows what he’s competing with, especially in terms of pricing, he’s more likely to come back with a quote that’s superior to what you currently have. Some administrators believe it’s unfair to reveal pricing and coverages to a competitor. I could buy the unfairness argument if information is being revealed to only one side, but full disclosure means everybody gets to see everything. The competitor coming in gets to see the existing policy, and the current agent gets to see the competitive quotes. When the dust finally stops flying, you’re going to end up with the best deal.

Have the decision makers there when the agents present their proposals. There’s nothing worse for the agent or the church than having the agent give his best presentation to somebody who’s not empowered to make the decision. If the decision makers are not present, somebody will have to translate that presentation for them and much will be lost in the translation. You want to make sure the right people are hearing directly from the agent and have the opportunity to ask questions.

Don’t be afraid to set up a dog-and-pony show some evening. You can get the board members together and give each agent a specified amount of time to make his pitch. That way everybody hears the same things and it will be easier to come to a group decision (for those churches that make these kinds of decisions by committee).

And now, a caveat to this whole thing. Many of the large mainstream denominations have group programs that are outstanding. The programs often have huge property and liability limits and are priced very competitively. The downside is usually service. One of my pet peeves as an agent was the occasions when the boss would insist that we solicit business from churches that had these group programs. My company couldn’t touch them and we knew it, but the guy with the rose-colored glasses would always insist that we could win these accounts away with our charm and good looks. After looking at these massive group programs I felt I was doing a disservice to the client by trying to convince them to abandon a clearly superior program just so they could see my smiling face from time to time.

Look folks, service is a wonderful thing and you want great service from your agent, but if he can’t match the multi-million dollar blanket coverages that you find on these big group programs, don’t switch. He may come back with something that saves you a few bucks and he’ll promise to return your phone calls and name his firstborn after you, but when you compare costs relative to coverage, you’ll be making a bad decision if you leave the group program.

A little knowledge, planning, and effort on your part can save your ministry a lot of money, and since I haven’t seen the church yet that has too much money, I’m sure you can find better uses for it than paying insurance premiums. Meanwhile, I’m going to head off to the Insurance Agent Witness Protection Program so I can remain safe from all the insurance companies and agents who are now out to get me.

NOTE 3: Rick is available to speak on this subject. Leave your contact information in a comment, or email him.

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