Allow me to create the scenario for you. A church has been meeting in a school for several years and has had significant growth. After three years they finally formed a committee to research and purchase a building to use for their church. The building gets purchased and is in the process of being renovated when one of the members of the committee reminds the church that they will need insurance for the building as well as contents coverage, coverage for the used church van they are about to purchase, general liability and medical payments coverage, and professional liability for the pastor.
The agent/church member (who happens to also be a deacon in the church) meets with the finance committee and the pastor and presents a very attractive package providing coverage for all the areas required. In order to avoid the appearance of a conflict, the agent does in fact suggest the church get quotes from two or three other agents in the area. The chairperson of the finance committee gets two other quotes and the costs are very much in-line with what the deacon/insurance agent suggests. So the church votes and approves the purchase of the policies through the deacon/insurance agent.
So far, I think most would agree all appears to be in order. But here is where there may come some issues to consider. Fast forward two years and sadly the church catches fire due to an accident in the kitchen. A claim is filed through the deacon/insurance agent. Here is the question, just where does the loyalty of the agent lie? Is it to the company he/she represents or is it to the church where he/she is a member? There is no doubt in my mind that an agent can ethically and legally represent both entities in good faith. But what happens when a dispute arises over either the value of the church building to rebuild, or the value of the contents destroyed, etc.
Let me play out the scenario a little further. Of course the agent files the claim through the carrier, who we will call ABC Insurance (if there is such a company, there is no intent here to draw any similarities). ABC Insurance sends out a property adjuster to survey and assess the damages and work up a statement of loss. The adjuster puts the value of the claim as $650,000 for the building and $225,000 for the contents. While the deacon/insurance agent and the pastor seem to be comfortable with this, a member of the committee had a loss of his home two years prior and used a public adjuster. He tells the pastor and the committee that the public adjuster was able to increase the value of his claim by nearly 25%. When the deacon/insurance agent hears about this, he begins to worry about his loss ratio and also begins to share some not some complimentary thoughts about public adjusters.
Before you know it, there is now increased tension between the deacon/insurance agent and his pastor as well as other members of the committee. And before you know it, someone comes right out and basically states that they believe the agent has a “conflict of interest.”
So, what is the best way to handle this? Let me first state that I have pastured several churches, most of which were smaller. In each of my pastorates, I did not have anyone who was an insurance agent to sell our church the coverage we needed, so I never had to deal with that situation as a pastor. However, I did once serve in a church where one of the members (who did happen to be a deacon) was in fact the insurance agent for the church. In that situation, I was asked by the pastor to review the church policy coverages due to my claims background and let him know my thoughts. After a thorough review I was 100% comfortable that deacon/insurance agent did a very commendable job in the packages offered as well as the pricing and carrier selection. The pastor had also shared with me that the church had a few smaller claims through the years and the agent was always very helpful to the church. In their case, all worked out well. And I do believe in most cases it will.
My only caution would be that insurance agents/brokers who are members of a church where they have the opportunity to sell coverages to the church, that they keep in mind the above scenario and work hard to ensure there is no appearance of a conflict. But always be prepared that someone might level an accusation.
If anyone has had any situations that relate to this subject, please do feel free to e-mail me as I would really like to hear about some of these experiences, good, bad or indifferent.
Michael R. Boutot
The Institute for Church Safety & Risk Management
(662) 322-6713 michael@ChurchRiskManagement.org http://www.ChurchRiskManagement.org