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Focus
on: insurance
A marriage of convenience |
sponsored by
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| Charities
rely on comprehensive insurance policies to protect themselves
against financial and organisational meltdown more than ever
before. But can insurers offer the third sector more than
just cover? Hannah Fearn finds out what insurance companies
are doing to build their relationship with charities |
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The
popular proverb says insurance is like marriage – you
pay and pay and pay, and never get anything back. But marriage
is also a relationship and, likewise, insurers are now doing
their best to build a two way relationship with charities.
In the charity world, insurance and risk management are major
concerns, and investment in a suitable insurance policy has
become essential. Charities must prove they are insured against
a catalogue of potential risks and are forced to take difficult
decisions over whether certain insurance packages, such as
trustee indemnity, represent value for money.
In our increasingly litigious society, charitable activities,
such as volunteering, are becoming a legal minefield. Many
fear that one small accident at an event could leave a non-profit
organisation financially crippled. Within this environment,
a growing number of insurers are breaking into the third sector
market and finding it lucrative.
And these are not the only changes to take place – the
relationship between charity and insurer is also morphing
from customer/supplier to a broader role of advisor and partner.
Research carried out by Zurich Municipal found that many charities,
especially medium and smaller sized organisations, did not
have a dedicated risk manager. In most cases the organisation’s
finance director becomes responsible for the purchasing of
insurance, and for the smallest charities it is often down
to untrained trustees to review and select a suitable policy.
Paul Emery, head of charities and the voluntary sector at
Zurich Municipal, says that to be a real partner of the sector,
insurers must understand the differences between the smaller
and larger charities and tailor their products and their service
to them; but they must also become an advisor.
“We want to help charities to manage their risk so they
can do the things they want to do,” Emery says. “What
we aim to be is very much a partner to the sector rather than
just a supplier of insurance. A lot of our activity is around
engagement with key stakeholders.”
To that end, Zurich’s charity team has met with government
ministers, Acevo and NAVCA to name just a few, in an attempt
to influence policy and educate the sector in risk management.
The insurer also prefers to build its relationship with its
customers by conducting face-to-face meetings, but this is
not always practical. However, it is looking to make this
type of contact-building more cost effective and affordable
for its work with the smallest charities.
Zurich believes it can capitalise on the growth in public
service delivery among charities, again placing itself as
partner rather than just a supplier to the third sector. “We
think we’re very well placed to help our customers understand
the benefits of the risks of partnering and getting into this
whole area of contracted public service delivery,”
Emery adds. He warns it is important charities understand
that along with the cash tied up in a delivery contract, comes
risk and responsibility.
The Governance Hub is to issue guidance late this year on
trustee liability. Head of the hub Jolanta Lasota worries
that many trustees don’t realise how many activities
and potential pitfalls involved in running a charity are not
necessarily covered by basic insurance packages.
She says fears about personal liabilities are beginning to
prevent some people from becoming trustees, and guidance needs
to make it clear exactly what trustees may be found personally
accountable for, and how insurance providers can help limit
broader risk. “It’s important that people who
volunteer and give their time to run charities should be aware
of the risks and feel comfortable with those limited risks
that exist,” she says. “It’s vital to recognise
what is actually covered. There are exceptions and limitations
to insurance and trustees need to understand this.”
The report, as yet unpublished, aims to find the gaps in information
about risk management and liabilities, identify the genuine
and the perceived barriers to charitable activity created
by liability, and how these affect the recruitment of trustees.
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Lasota says one of the biggest challenges for charities is
to decide exactly what insurance they need, and whether it
is worth investing in additional insurance just to reduce
the concern of trustees and senior staff members over potential
recriminations.
She says that although training in risk management is already
provided by sector umbrella bodies such as NCVO, insurers
can still play a role by supplementing this. “It would
be useful if anybody involved in providing those services
also made that information available in a suitable form for
trustees.”
Zurich is not the only insurer attempting to broaden its horizons
in the third sector. Earlier this year Royal & SunAlliance
carried out research into the levels of insurance cover invested
in by smaller charities. It found that microcharities were
failing to protect themselves because they believed they did
not need insurance (Charity Times, July 2006). Gary Johnson,
charities development manager at the provider, says it always
worked through insurance brokers in an attempt to gain greatest
access to their market.
“There are not many brokers around the UK who have a
track record and expertise in selling charity insurance,”
he says. But R&SA, like Zurich, is intending to form a
closer alliance with the sector.
“We have spent quite a considerable period of time focusing
on this,” Johnson says. “The focus in the last
few years has been on management risk and I think that’s
to be applauded. One of our challenges is to make the link
between risk management in an insurance context and risk in
an overall context.”
R&SA already provides support to NCVO and the CFDG by
running workshops for their members. “In reality, we’re
probably reaching the converted but it’s the unconverted
that’s the challenge,” Johnson says. “We
have to start somewhere and that kind of [workshop] is extremely
useful. I do think that one of our challenges is to get people
to think about what they want to cover rather than just buying
at the cheapest price.”
It is clear, of course, that the key job of the profit-making
insurance companies is to sell their products. But can this
relationship between the insurer and the insured also provide
other benefits to both parties?
Chris Richfield, head of access and diversity at Scope, says
by using their consumer power to their advantage, charities
can actually have a positive impact on the profit-hungry world
of insurance by promoting their mission and values. This can
help justify the cost of insurance on the balance sheet.
“If you don’t use it it’s just a dead amount
of money that looks like a waste,” Richfield says. “Our
buying decisions are influenced by our mission. We’re
looking for organisations that can demonstrate their commitment
to disabled people. Organisations that don’t, we just
will not work with them. That’s where the real value
for money is achieved.
“Where the value of insurance really comes in is where
you can leverage change, how you can use that business relationship
to bolster and support the work you do,” he adds, “and
you get the peace of mind to do the challenging work that
we do.”
To ensure it is getting the best deal for a charity of its
capacity, Scope benchmarks itself against the insurance packages
chosen by the other leading charities that make up the Charity
Consortia Insurance Sub-group. It also purchases through a
broker, largely for protection. “Insurance is often
about the things you miss rather than the things you don’t,”
Richfield says. “If you go through an insurance advisor
then if they have missed anything you have the potential to
sue them.”
Charities are aware that the attempts by insurers to build
a new kind of relationship with charities are self-interested.
“At the end of the day the insurer will only do it if
they can see any potential mileage in it for them,”
Richfield acknowledges.
Dominic Sullivan, head of legal services at the Cats Protection
League, says insurers always have a vested interest in providing
advice and support to potential clients, but says this can
be very good for the sector as a whole.
“They are emphasising this role of carrying out risk
assessment work, and health and safety,” he says. “About
10 years ago insurers were a bit wary of the charity sector.
They didn’t really understand it. They weren’t
sure which risks were being covered.”
The awareness of the importance of risk management has increased
among the sector, and that is now reflected in the SORP. Despite
this, the Cats Protection League has used the same insurance
broker throughout the 10 year period of change. “We’ve
built up a good relationship through our broker with our current
insurer. Over time they have understood the business and the
risks. They have got the claims history and that’s reflected
in our premium,” Sullivan says.
Although the charity carries out an audit every year to establish
whether it can offer cost savings, their current supplier
remains the best option.
Though it may be a marriage of sorts, the increasingly close
relationship between insurers and charities has one major
benefit for the third sector – it is saving money. “In
the last two to three years insurers have increasingly looked
at the charitable sector and seen that it’s not a high
risk industry or sector that we’re in,” Sullivan
concludes. The result? “Premiums are becoming more competitive.”
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