Premium hikes have churches scrambling

About a week before Christmas, historic Washington Street United Methodist Church in Petersburg, Virginia, got a certified letter stating that its annual premiums under United Methodist Insurance were going from about $6,000 to $30,000.

And a payment was due Dec. 28.

“We were shocked, to say the least,” said the Rev. Tom Lester, pastor.

Washington Street — host of the first General Conference of the Methodist Episcopal Church, South, in 1846 — scrambled to find more affordable insurance from another carrier.

The church even closed the doors of its 1842 sanctuary for the first two weeks of January.

“We didn’t have worship. We didn’t have recovery groups. We encouraged no one to be in the church. … We had no insurance,” Lester said.

Washington Street recently found property and liability insurance from another carrier for less than it had been paying.

But it was hardly the only church to have a tense Christmas because of large rate hike notices from United Methodist Insurance, a wholly owned, not-for-profit subsidiary of the denomination’s General Council on Finance and Administration.

“I was very frustrated to receive multiple calls just before the Christmas break from church pastors and trustees,” said Jim Allen, treasurer and director of administrative services for the Tennessee Conference. “Many indicated they were being held hostage by exorbitant premium increases with short notices over Christmas.”

About 3,700 United Methodist churches in the U.S. were covered by United Methodist Insurance as of December, and about 500 got premium notices just before Christmas.

The Virginia Conference treasurer, David Dommisse, shared his frustrations on the conference website.

“From my perspective, it is appalling and unacceptable that notifications were not sent out allowing local churches to be aware of large rate increases and affording time for review of options,” he wrote.

Moses Kumar, top executive of GCFA, addressed complaints in a Jan. 28 press release.

“We acknowledge there have been issues,” he said. “We apologize and are working diligently to find solutions, both to the issues around competitive (pricing) quotations and timing.”

The Book of Discipline — the denomination’s policy book — has since 1976 required the finance agency to provide an insurance program. It’s been organized and focused in different ways under different names, including United Methodist Insurance Program and United Methodist Property and Casualty Trust.

Since 2011, it’s been called United Methodist Insurance.

The program has been backed by reinsurers, such as Swiss Re, while retaining some risk for insurance-related losses. Until recently, Church Insurance Agency Corporation, affiliated with the Episcopal Church, handled much of the administrative work.

United Methodist Insurance itself has just two employees — Mike Plesko, president and CEO, and Sid Gray, vice president and treasurer.

Though enrolling more churches as clients in recent years, United Methodist Insurance has struggled financially. Its most recent audit shows net losses of $454,213 in 2017 and $835,216 in 2016. Those owed to individual large claims filed late in the year, Plesko said.

But a former president of United Methodist Insurance, the Rev. Stephen Hundley, said it has long needed more capital to grow and to take on more risk — thus being able to claim a greater share of income from premiums.

“That was always the challenge, to have enough capital,” he said.

In late August, GCFA announced in a press release that United Methodist Insurance had entered into an agreement with AmVenture, a subsidiary of AmTrust Financial Services, to provide property and casualty insurance to United Methodist churches.

When asked recently the reason for the shift, GCFA officials provided this written answer:

“The change is the result of the desire to be more competitive and provide more choices for the churches and less loss for GCFA. The change was made by UMI and its owner, GCFA, in order to move to a fully insured program — where all risk would be held by non UMC-related entities.”

In a Q&A prepared for United Methodist Insurance customers, GCFA elaborated on the change:

“Your prior coverage with UMI was administered through a captive program, where UMI assumed partial risk for insurance-related losses. As stewards of the church’s resources and to provide the best protection for United Methodist churches, the current program is being replaced to offer independent protection for the ministries it serves.”

GCFA, in its written responses to United Methodist News Service, described AmVenture as an insurance producer that secures coverage from insurance carriers “rather than insuring or reinsuring the risks themselves.”

Plesko, in a followup interview, noted that the GCFA committee overseeing United Methodist Insurance wanted it to return to being merely an endorser of a brokerage that would find carriers willing to take the risk.

The hope is that United Methodist Insurance will stop its losses and be able to pay back annual conferences that had provided capital in years past, he added.

But the August press release from GCFA did not mention United Methodist Insurance’s financial challenges. Instead it dwelled on the better customer experience churches could expect, as well as a wider array of insurance products.

The Pacific Northwest Conference had all 242 of its churches with United Methodist Insurance, and conference treasurer Brant Henshaw sought to learn what the new arrangement might mean for costs.

“We were told at the beginning that we probably would not see a big premium increase. When we got to December, after a few administrative slips here and there, we had a different story,” he said.

Henshaw said the increase was in the 40-50 percent range. He acknowledges that wasn’t as large as what some individual churches elsewhere would face.

“Our jaws still dropped,” he said.

The Pacific Northwest Conference chose to go elsewhere to insure its churches and with its longtime broker’s help found coverage for about what it had been paying, Henshaw said.

Wright’s Chapel United Methodist Church in Cookeville, Tennessee, also made a switch after learning just before Christmas that its United Methodist Insurance premiums would rise from about $900 to $4,600. A quarterly payment was due Dec. 28.

“Why didn’t we start getting letters back in October and November, so people could start looking?” said Morris Irby, administrative council chair of the small church, part of a three-point charge. “That rubbed a lot of us wrong.”

Why the late notice and large hikes?

Plesko said he understood that the carriers AmVenture was working with wanted more data about churches before premiums could be established.

“It was taking them quite a long time,” he said. “It’s a matter of reaching the church and reaching the right person at the church.”

The unfamiliarity with churches and the recent history of large individual claims by some churches were factors in the premium hikes, Plesko said. He added that United Methodist Insurance, as a nonprofit, had tax advantages that helped keep rates low when it operated a captive program.

Exactly how many churches have moved away from United Methodist Insurance since the December notices is unclear, Plesko said.

But the recent GCFA press release included a statement from Sam Liotta, president and founder of AmVenture, acknowledging churches’ and conferences’ unhappiness.

“We are actively seeking ways to correct any problems created by the coverage quotes received by churches insured with UMI,” he said. “We apologize for the timing and communications shared for January renewals.”

Hodges is a Dallas-based writer for United Methodist News Service. Contact him at 615-742-5470 or newsdesk@umcom.org. To read more United Methodist news, subscribe to the free Daily or Weekly Digests.