An Insurance Update from UCCIB
- Mission Presbytery News
- Apr 23
- 11 min read
As Insurance Companies Respond To An Unprecedented Market Stress, What Does This Mean For Your Church?
We wanted to provide you with a quick insurance marketplace update. The landscape of church insurance nationwide is currently fraught with instability, characterized by a distressing trend of premium increases, deductible increases and policy non-renewals. Churches across multiple states are finding themselves in a precarious position as the insurance business continues to tighten within the church insurance segment. Many of you may have already experienced the current unpleasantness of the marketplace,
You have heard us say many times we are educators and advocates for our clients, we are teachers. As I put this insurance marketplace update email together, I think this is a good word for the wise for anyone who is looking to lower their expenses. I am reminded of what a friend once told me: It is unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money – that is all. When you pay too little, you sometimes lose everything, because the thing you bought is incapable of doing what it was bought to do. The common law of business balance prohibits paying a little and getting a lot – it can be done. If you deal with the lowest bidder, it is well to add something extra for the risk you run. And if you do that, you will have enough to pay for something better.
Churches and ministries need to be prepared to address this “new normal” by ensuring that their facilities are well maintained to best withstand the adverse impacts of severe weather. Such actions will not only work to protect church assets but will position churches and ministries to take advantage of the best available pricing and coverage terms in the insurance marketplace.
What Are The Factors Contributing To This Trend?
An unprecedented rise in natural disasters. According to the National Oceanic and Atmospheric Administration, in 2023, the U.S. experienced a record breaking 28 billion-dollar plus disasters, causing an estimated total of $92.9 billion in damages (with 6 of these occurring in Texas). This was the fourth consecutive year there have been 18 or more separate billion-dollar disasters, creating a consistent pattern of large catastrophic weather events becoming the new normal.
Building costs have surged. While prices have fallen back from their highs in 2021/2022, price levels remain above the long-term average. And with an increase in storm activity, these higher building costs have had a major impact on insurance carriers.
Liability trends. As churches are held to a higher standard of care, liability verdicts continue to mount as sympathetic juries drive large judgements. These can take on several forms but often include sexual abuse within the church (let’s not forget the Boy Scout scandal which is not over with yet), personal injuries involving slips and falls, playground equipment and others and of course vehicle accidents. President Biden in September 2022, signed S. 3103, the “Eliminating Limits to Justice for Child Sex Abuse Victims Act of 2022,” which eliminates the Federal statute of limitations to file a civil action for minor victims of sexual abuse, human trafficking, forced labor, or child pornography; The bill eliminates time constraints for survivors to file civil claims related to sex abuse crimes against minors, including forced labor, sex trafficking, sexual abuse and sexual exploitation of children. We all agree that victims need to be heard and have their day in court. This impacts the availability of sexual misconduct liability coverage and insurance premiums for a church.
Unfortunately, church properties have proven increasingly problematic particularly where the tenant-landlord lease agreement does little to protect the church landlord. Contracts between churches and third-party users of church premises should be considered mandatory and part of sound facility use agreement procedures churches must implement with all third-party users of church facilities.
Social inflation (or Nuclear Verdicts) is one of the latest buzzwords in insurance. It is used by insurers to describe the rising costs of insurance claims resulting from things like increasing litigation, broader definitions of liability, more plaintiff-friendly legal decisions, and larger compensatory jury awards. While the core components driving social inflation have been evident for some time, their impacts on the insurance industry have only really started to come to a head in the past couple of years. Increasing litigation costs brought by plaintiffs seeking large monetary relief for their injuries. “The “social” aspect of the term represents shifting social and cultural attitudes about who is responsible for absorbing risk (the insurer or the plaintiff).”
Claims. Inflation is a loss of purchasing power that reflects the rise in prices for goods and services over time. While it’s easy to measure price changes of individual products over time, human needs extend beyond just one or two products. The reality is that it costs more to repair and/or rebuild buildings today as a result and those costs are going to be passed on to the consumer just like with any other industry. When an insurance company looks at premiums paid versus losses paid, they develop something called a loss ratio. The calculation is simple: Premium paid divided by losses paid. An insured starts to become unprofitable for an insurance company once their loss ratio approaches 60%.
Allow me to provide an example(s) for illustration purposes. If an insured paid on average an annual premium of $25,000 a year for 5-years for a 5-year period of $125,000 to an insurance company, and had no losses for the past 4 years but ends up having a property loss on their roof as a result of a convective storm, hail damage, wind damage in the 5th-year and the roof needs to be completely replaced. The cost to repair or replace the roof is $160,000. You have a loss ratio of 1.28. Now the insurance company has lost more money in just one property claim than they collected in the 5-year period. We can even reduce this example to $90,000 roof loss. You have a 0.72 loss ratio. Let’s say we have had 3 losses totaling $80,000 over that 5-year period using the same 5-year annual premiums collected. That’s a 0.64 loss ratio. All liability claims go into this measurement as well. All your losses get combined as part of the calculation for the measurement. It doesn’t take much today to reach that 0.60-measurement used by the insurance industry. Inflation has a direct impact on your insurance premiums and right now a direct impact on a church’s potential ability to secure adequate insurance coverage. Every claim, both on individual basis or on a group basis has an impact on the global insurance marketplace. Insurance is a global product.
We need to understand that the roof on a church is going to cost more than a roof on a house. We can't compare a personal lines (homeowner's) policy to a commercial lines policy. They are two different insurance products.
As a community, we are going to have to be more proactive in maintaining our properties.
Financial Loss. Recent figures from AM Best US Property/Casualty industry reported a $26.5 billion net underwriting loss in 2022. Compare this to a $4.1 billion net underwriting loss in 2021. Through the end of 2023, three of the four more widely known church insurance carriers have a 5-year combined loss ratio exceeding 100% (meaning they are paying out more than they are bringing in). Their 5-year net income averages a negative $86 million dollars.
Carrier Withdrawal – Church Mutual, one of if not the largest insurer of churches nationwide, is said to have dropped over 1,000 churches just in Texas and that number may grow. We have seen multiple insurance carriers non-renew their church book of business in multiple states, Texas, Louisiana, Arizona, New Mexico, Colorado, Indiana, Kentucky, North Carolina, Pennsylvania and Illinois just to name a few. If the church isn’t being non-renewed, they are experiencing double digit premium increases and, in some cases, seeing changes to their terms and conditions. In an already tightening marketplace, this has been near disastrous and those being dropped are seeing significant changes in premium, policy terms and deductibles due to a saturated and ever tightening marketplace.
Cost of Reinsurance – Reinsurance is simply put, insurance for insurance companies, but the amount of coverage is capped so when the number of catastrophes increases and the cost of construction goes up, insurance companies have to pay more out of their operating surplus. And the more the reinsurance is tapped, the higher the reinsurance costs are, in many cases being up over 40% in 2023, and those higher cost trickle into the marketplace.Reinsurance continues to reduce the appetite, carriers having to increase the risk they retain, reduced investment into the property insurance market and an extended history of very low investment returns are applying financial pressure. Additionally, “capital inflow has not kept pace with outflow and increased demand to cede more risk to third parties” according to a recent report from Aon. Overall, reinsurance capacity was restricted. Reinsurance carriers want to see the actual impact of proposed changes. This may continue drive carriers to hold a firm line on changes in terms and conditions to secure better terms.
As A Result, How Will This Affect My Church?
No carrier is immune to these issues, and they are all having to choose a sustainable path, or they will face financial downgrades or worse. Generally, they are doing this in several different ways. Brotherhood Mutual recently had their AM Best Credit Rating downgraded to a B+++ with a negative outlook, while Church Mutual earlier this year was removed from under review by AM Best with a A- rating and a negative outlook. As you know, If a church in the future decided to take out mortgagee, a loan, etc, having less than an A- AM Best rating could be an issue. AM Best is a leading rating agency for the insurance industry, covering over 100 countries. They assess the creditworthiness of insurance companies based on various factors. AM Best assigns credit ratings that evaluate an insurance company’s likelihood of defaulting on its obligations. These ratings help consumers, financial professionals and investors make informed decisions.
Renewal Premium Increases – Increases have to some degree trended over the last several years and this will continue for 2025. While many factors can affect the actual increase amount, averages seem to currently be in the 10-20% range. Those numbers could be even greater if significant property value changes are applied.
Wind/Hail Deductible Increases – Just three to four years ago, it was unusual to have a percentage wind/hail deductible and if you did, 1% was pretty much the norm. Today, we are seeing a trend to 2%, 3% and even 5% deductibles for a wind and/or hail loss, especially in the Gulf Coast region and some major metropolitan areas.
Increased Property Values – With the recent rise in building costs, insurance carriers have taken a serious stance on structures being insured to full replacement value. In many cases, even with inflationary increases applied over the years, the insured cost per square foot has not caught up to the rise in building costs so expect to see those values increase. Some could be significant increases depending on current cost per square foot valuations.
Cancellations – As previously noted, some insurance carriers like Church Mutual, Brotherhood Mutual and others are cancelling large groups of business in order to reduce their capacity in “catastrophic” area or areas deemed a higher risk (more wind and/or hail prone areas, more rural areas, etc.) or insureds that have had a significant loss history.
What More Do I Need To Know?
There Will Be An End – While we have not previously seen anything like what we are experiencing now, it likely has an end date. Of course, to some degree that’s dependent on our weather cycle but it’s the opinion of some we will see rates leveling off in the next two years, possibly at the start of 2026.
Continue Your Commitment to Safety and Risk Management: More than ever before, pay careful attention to mitigating any future property or liability losses. This may include:
Develop and adhere to strict sexual abuse safeguards for both children, teens and vulnerable adults. Advanced training with programs like the Praesidium Academy (SafeConduct™ - Prevent Abuse with Training, Policies & More) or the Evangelical Council for Abuse Prevention are excellent resources.
Implement and adhere to strict transportation guidelines whether that involves church-owned vehicles or those driving on your behalf.
Have your metal roofs inspected and maintained. Metal roofs require periodic maintenance and without it, they have a tendency to develop leaks (which are typically not covered by your insurance).
Protect your A/C units against theft.
Utilize water sensors. For additional information regarding water sensors, please visit - Insurance Board Water Sensors - Prevent Flood Damage
Involve those in your community. Have the police and fire department look at your building and ask for their recommendations.
Conduct scenario planning. Play the what if game to see how prepared you are……(medical emergency, disruptive adult or teen, press on-site due to something that happened at your church, shooter on the premises, etc.)
Plan ahead for your Special Events. Check with your insurance agent on your planned activities for coverage verification or the possible need for a Special Events policy.
Transfer risk. If you have others using your property, you need to take the proper steps to transfer that risk to their insurance, not yours. Make sure you have a facility use agreement in place with a hold-harmless in favor of the church and/or your ministry and that you have obtained a certificate of insurance naming the church and/or your ministry as an additional insured.
Understand That Churches Are Typically Not A Preferred Insurance Market – As much as we’d prefer otherwise, many insurance companies are not favorable to insuring churches. Their risks are unique, their budgets can be limited, often their buildings are aged, and by their very nature, they are an open door. All these things limit the number of companies willing to insure churches so we have to be proactive in reducing claims. But we also believe that if you take the steps mentioned above, you can remain a viable risk that an insurance company would love to insure.
Have A Trusted Partner – You need protection from people who understand churches. Work with an agent who knows how to “navigate the storm” as best they can. More than ever before, it is important to have an agent who understands churches and the unique risks they face daily and who has a relationship with markets who write church insurance. As an independent insurance agency, we have the privilege of working with a broad network of A-rated or better carriers, which allows us to tailor innovative insurance solutions to meet the evolving needs of Christian ministries. Our extensive knowledge of ministry-specific activities sets us apart, enabling us to offer comprehensive coverage in areas such as safety, cyber security, and religious freedom.
Our team at Jensen Ford Insurance Agency thrives on professionalism and care, understanding that your insurance needs are unique and may change as your ministry grows. We pride ourselves on our thorough needs analysis and ability to negotiate effectively within the insurance marketplace.
We understand that’s a lot to take in. But we’ll get through this – together – as we work with you in protecting your ministry.
Insurance Board provides many resources to churches, and they are available at Church Safety Resources - Insurance Board Safety Central. Insurance Board is a covenantal partner in managing risk, but prevention first starts with you.
Property and Liability Checklist(s)
The Insurance Board Loss Control team has created property and casualty checklists for our churches to utilize. Here are the links in addition to a link to a webcast conducted by one of the board members at the Insurance Board, Howard Sewell, on church self-inspections. This is also a fantastic resource I would highly recommend.
Insurance Board Risk Control Guide For Ministries:
Upcoming Insurance Board Webinar: How to Plan for Emergencies in Your Church
Date: April 29th, 2025
Time: 2:00pm Eastern Standard Time via ZOOM
Link to Register for the webinar: https://events.zoom.us/ev/Aj0dc81a6oO6nbZ_3owOJQDTc6vR6mahV-Lx-OVrswGr2_jqrFWD~AhiGBlVeYxtiAtKz3-fWl4UPjT47pkcGpSaCSzlxZCnmo4mPI7y5DpOPPw?lmt=1743439011000
Please join Insurance Board’s Director of Loss Control Chad Cunningham as Insurance Board equips your ministry for effective response and recovery during an emergency. Enhance your knowledge and boost your confidence in planning efforts to safeguard your community.
Our agency only works with “A” rated or better insurance companies. We encourage you to share the information with other leaders within your ministry. Amy and I continue to be grateful and blessed to be your church insurance agent! As your trusted agent, contact us first If you should have any questions, please do not hesitate to contact us or a member of our team.
Blessings,
Marc
Marc Gerardis
Jensen Ford Insurance Agency
8000 S. Meridian St. Suite A
Indianapolis, IN 46217
817-516-5501
317-888-8897 Fax
Facebook: JensenFordInsurance
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