Is there a specific thing known as “Catholic insurance”? If so, what is it?

In order to answer the question, we have to make sure that we’re clear on what we are actually talking about.

What Catholic Insurance Isn’t

So, the basic principle of insurance is risk transfer.

You “insure” against a loss because you are seeking to transfer risk from yourself to another person or entity.

Take an example from property and casualty insurance, for instance.

I might have homeowners insurance on my house to protect myself in case my home burns down. If this tragic event were to occur, then the property and casualty company would pay to replace the house. I wouldn’t have to pay for the loss myself.

So, in insuring my home, I just transferred the risk of my home burning down from myself to a property-and-casualty insurance company.

Now the company doesn’t take this risk on out of the kindness of its heart.

It’s an exchange.

I pay the company some money (each month, quarter, year, etc.) and, in exchange, it takes on my risk.

Of course, the company’s actuaries evaluate the risk to see if it’s the sort of liability they want to accept. They’ll evaluate the likelihood of my house burning down.

They perform this assessment based on various questions about where the house is located, my personal track record in owning a house, and so on.

In general, the risk assessments are based upon the “law of large numbers,” which is a principle that – simply stated – means that the bigger your sample set is, the more accurately you’ll be able to predict the frequency of an event.

In insurance terms, the “event” in question is some kind of loss – like a house burning up.

The insurance company’s number crunchers are going to ask whether or not they think my risk is a risk worth taking on – and at what premium rate.

If they think there’s little risk, my premium will be low. If there’s a more than a little risk, my premium will be high. If the risk is significant, they may decline to cover me at all.

So far, so good.

In terms of all this, there’s really not any kind of a specific “Catholic” way of insuring people or performing risk-assessments.

It’s not like Catholics transfer risk in some unique way. And it’s not as if a Catholic insurer is a using different math or evaluating probabilities in vastly different ways than commercial insurers.

No, in these senses, there is arguably no such thing as “Catholic insurance.”

All insurance companies – Catholic or not – calculate risks and then accept them (or not) in exchange for premiums. In this regard, all companies conduct business the same way.

What Catholic Insurance Is

So, is there a difference? And, if so, what is it?

In fact, there are differences. I’ll mention two.

Fraternal Insurance

The first difference has to do with who may avail themselves of the coverage.

Commercial insurance is basically available to anybody. Anyone who takes notices of a commercial insurance company can do apply for coverage.

It’s a bit different with a Catholic insurance company.

A distinctly Catholic company is a type of company called a fraternal insurance company.

With fraternal insurance, you have to be a part of a particular “fraternal group” in order to do business with that group.

It’s an imprecise comparison, but there’s an analogy with the United Services Automobile Association, or USAA for short.

In order to do business with the USAA, you have to have some current or past connection to the United States Armed Forces.

Fraternal insurers are similarly restricted.

“Fraternal” groups – also sometimes termed “fraternal benefit societies” – might be organized around a group with some sort of ethnic, geographic, religious, social, vocational or other commonality. You might have a fraternal group that’s based around a particular nationality or you might have a fraternal group that’s organized around a particular labor discipline.

In the case of a Catholic company, it’s centered around a fraternal group that’s based around a particular religion.

And Catholics are certainly not the only religious group so organized. Baptists, Lutherans, Mennonites, and many other groups have their own societies – and insurance benefits.

One feature of fraternal associations is that they are tax exempt under the current Internal Revenue Service Code and are designated as 501(c)(8) organizations.

But, to maintain this tax-advantaged status, these associations have to scrupulously adhere to the principles of their bylaws, charters, constitutions, or other founding documents. Individuals seeking insurance coverage have to have some membership tie to the insuring society.

Thus, the real, first-line difference between Catholic insurance and commercial insurance is that, by “Catholic insurance,” we’re really talking about a particular sort of fraternal tie.

If you’re Catholic, then you may become affiliated with a Catholic fraternal group and, through that group, obtain insurance protection for you and your family.

Investment Philosophy

But there is something additional that arguably separates “Catholic insurance” from its non-Catholic cousin.

This second difference has to do with how a Catholic company handles its money.

Every insurance company is required to have access to a certain amount of money in order to be able to pay claims and policy surrenders.

But it’s not as if they’re keeping this money in tin cans or stuffed into mattresses at the company headquarters.

They’re going to have the money inside of some investment vehicle or other.

What makes Catholic written legal reserves a little bit different is that the kinds of things that Catholics invest in are going be those things that are going to comport with Catholic belief, and Catholic doctrine.

In particular, Catholic companies will invest in things that the Holy See – that is, the Vatican; the Pope, in conjunction with the College of Cardinals – holds to be a permissible way to spend money.

So, since the Catholic Church opposes abortion, Catholic insurance companies will not invest money in that industry. They won’t donate dollars to Planned Parenthood. And so on.

This is important, I think, because Catholics have definite moral beliefs. One of the distinguishing features of Catholic insurance, then, is that, in their investment decisions, Catholic companies mirror these beliefs.

In Summary

Catholic insurance is based upon the same sort of risk transference that all insurance is based upon. In this relationship the insured pays money (a premium) and in return the insurer promises to cover the insured in the event of a loss.

Catholic insurance companies do not generally assess risks differently. All life-insurance companies use universal mortality tables (e.g., the Commissioner’s Standard Ordinary Table) and calculate risks use the same mathematical procedures.

These are not the main points of difference.

Where Catholic insurance companies do differ is with respect to who may apply for coverage. As fraternal-benefit societies, Catholic insurance companies may only offer coverage to members. And members will be active Catholics in good standing with the Catholic Church.

Additionally, Catholic insurance companies will adopt investment strategies that reflect Catholic moral beliefs. They will not put their money into industries – like pornography – that conflicts with Catholic teaching.