| |
| |
Focus on:
insurance
Rising to the challenge |
|
|
| |
| Mark
Ingram discusses the various risk considerations that organisations
should undertake, and the challenges for charities in developing
strong working relationships with their insurance advisers |
| |
The
general insurance sector increasingly recognises the need
to offer specialist policies and advice to charities and other
voluntary and community groups. This should be seen as good
news for charities as they become more able to demand special
treatment in this important area. At the same time, pressure
continues to mount across many different areas including higher
expectations for good governance, more competition for funding
and a greater move to community-based care.
Not only are the numbers of charities growing (a net increase
of 28,000 since 2000 according to NCVOs UK Voluntary Sector
Almanac) but it is increasingly clear that many unique factors
such as their structure and organisation, huge diversity of
activities and even the very way they can operate, varies
considerably to other commercial organisations.
What is it that has led to these trends for charities? As
ever, much of this is driven by government policy as more
social care programmes, previously managed by local and national
statutory bodies, are being contracted out to the private
sector.
In parallel, we see the landscape for third sector organisations
changing through the ChangeUp programme and in the formation
of the so-called Hubs of excellence such as Finance and Governance.
The drawing together of like-minded organisations and various
umbrella groupings has to be the right move. As the sector
becomes ever-more polarised between the very large and very
small players (for example in England and Wales, while 92%
of charities have an income of less than £250,000, nearly
45% of the sector’s income comes from only the top 8%
of charities) the need to share best practice and improve
coordination is, arguably, greater than ever before.
Top
So where does the need to work with specialist insurance advisers
come in? Although the annual insurance premium is often a
significant cost, it is very rarely considered to be money
well spent. In point of fact, it should be seen as a necessary
part of managing risk and protecting the financial assets
for all organisations regardless of size. In other words,
insurance provides essential security for the present and
the future both to the charity as an entity and to individuals,
whether they be clients, volunteers, employees or trustees.
The span of insurable risk is often far wider than most charities
may imagine. Beyond the risk of material damage to property
and liabilities to employees and members of the public, there
is the risk of the additional costs incurred that can result
from fortuitous loss or damage. Also are the potential costs
arising from imposed loss of licence or unintended damage
to reputation. The possibilities are almost endless and the
extent of required protection will depend on the size and
scope of each individual organisation.
According to the recent Governance Hub survey, 94 per cent
of trustees believe they do not have the requisite skills
to fulfil their roles. Not only must this be of extreme concern
to charities, but also to trustees themselves who should think
very carefully about their own unlimited personal liabilities
for their actions if they were to lead to financial loss through
a failure of duty of care.
This can be any inadvertent breach of trust or authority,
neglect, omission, misstatement, misleading statement, libel,
slander or other wrongful act.
The new Charities Act should have a big impact regarding this
specific area
of protecting the personal assets of trustees. This is because
charities will be able to more easily review their trust deeds
to allow the purchasing of trustees indemnity insurance.
A simple example occurred recently with a small charity which
received capital funding for a new project equivalent to more
than 25% of its normal annual income. The project was duly
and successfully set up and, after only a few months, problems
began to set in. Firstly, the hoped for specialist volunteers
needed to keep the project running became very hard to find
and retain.
Secondly, the charity’s trust deeds did not clearly
allow a broadening into this new area of work. As a consequence,
grant making trusts became reluctant to support this new venture.
For the trustees, one can understand their concerns about
how the initial funding may have been perceived as being inappropriately
managed. So much so, in fact, that at least one trustee paid
for his own indemnity insurance personally.
The above example also highlights the wide diversity of activities
charities may become involved in, as well as the rapidly changing
nature of their objectives which can be so affected by the
vagaries of funding. The key necessity is for charities to
look for insurance companies who have directly relevant experience
of their field and who can grasp and understand just what
the specific insurance needs are.
Dialogue is therefore essential. Providing full information
about what a charity does and what kind of management structures
and controls are in place will help to reassure the insurer
that your risks are well-managed. Adopting a no surprises
approach, rather than making a charity vulnerable to unfair
and expensive requirements, may even lead to less imposition
and lower premiums.
Mark Ingram is head of insurance operations at
Ansvar
Top
|
| |
| |
| |
|
|
