A periodic review of your insurance needs might be a chore, but it can protect your charity from paying for cover it doesn't need - and make sure that all of its activities are properly protected. Mathew Little reports
In a list of the most fascinating ways to spend an afternoon, reviewing your charity's insurance cover is unlikely to command a prominent position. But ignoring the issue is a mistake, according to David Membrey, deputy chief executive of the Charity Finance Group. "There is a very strong temptation, which I feel as much as anybody else, to decide that when you are very busy you don't have time to go into something that is inherently rather boring," he says. "There is a risk that insurance doesn't get the kind of review that it ought to."
But charities that don't pay periodic attention to the matter might pay higher premiums for their insurance than they otherwise would, pay for irrelevant cover for activities they no longer undertake or be uninsured for activities they have recently embarked upon. Membrey advises that charities carry out a quick annual check to work out whether their insurance needs have changed significantly. He recommends that charities undertake a thorough review of their insurance requirements every three years, taking a good look at what's available on the market.
But what should charities look for when starting such a review? Below are five top tips from charity insurance specialists and insurance managers working for charities.
1 Use a broker to advise you on which insurers to consider. Brokers arrange cover by selecting the most appropriate underwriter, but some deal with only one insurer. It is possible to cut out the middleman, and some small charities do this partly to avoid having to pay commission to a broker.
David Willingham, head of risk financing at Save the Children, advises against that approach. "Brokers will know the insurance market better than you," he says. "They will have the time to talk to several potential insurers and the experience and know-how to negotiate the best terms for you."
Brokers, he adds, will have more influence on the insurer than would a small charity.
2 The broker should be a specialist. Some experts advise dealing only with 'charity brokers', but others merely recommend that the broker should have sector knowledge and experience of dealing with charity insurers. According to the Charity Commission's CC49 guidance on insurance and charities, "the important point is to use a broker or insurer with specialist knowledge of the insurance requirements of charities to ensure that the correct coverage is arranged at a competitive price". Simon Hickman, managing director of Access Insurance, says that a lot of brokers don't understand charities, so it's important to find a specialist. You should also make sure the insurance broker deals with several insurers, he says: "There's nothing like a good dose of competition."
3 Expect and welcome questions from a broker. Hickman says: "Don't be fooled by brokers who don't ask enough questions - you might find you are left without cover when it comes to claims."
Ashley Hepburn, insurance manager at the British Red Cross and chair of the charities specialist interest group at Airmic, an association of professionals responsible for risk management and insurance, warns that one-size-fits-all charity products might not fit the particular needs of a given charity.
"A good broker should be asking a lot of questions about your charity and advising on appropriate cover," he says. But a charity also needs to provide as much information as possible to the broker about its activities and how they are managed. "The broker can then ensure this is presented in the best possible way to the insurance market," says Hepburn. "The better an insurer understands you, the better their pricing should be."
Membrey says that charities should show their policies on internal controls, disaster recovery, health and safety and whistleblowing to their insurance brokers.
4 Manage your risk. Richard Lane, managing director of the insurer Ansvar, says good risk management features, such as intruder alarms or documented staff procedures, should be rewarded in the form of lower insurance premiums. Unnecessary high-risk activities, such as hazardous fundraising events, should be avoided, he recommends. Many insurers offer extra services such as risk management training, seminars on claims defensibility and health and safety advice. "Use this to your advantage," says Hepburn. "Access to these services can even form part of a risk management bursary."
5 Price isn't everything, but it is important. Hickman says: "It's great trying to save money, but if you try to cut corners, or don't disclose information to insurers, then the chances are you are not going to have the right cover, or any cover at all." Don't make price your principal deciding factor, says Willingham; insurance is not a commodity in the same way as electricity or water. You need to choose the cover that most closely meets your needs, he argues.
But what if you simply can't afford that cover? Then you should go for a more expensive insurance that meets your most important risk concerns, and reduce costs by going uninsured on less serious risks that would not cause such a big financial headache. Self-insurance can also be a cost-effective option, says Hepburn, provided it is supported by excellent risk management.
CASE STUDY: SAVE THE CHILDREN UK
In 2012, Save the Children UK switched its travel insurance cover to a different insurer. The charity had adopted a hybrid policy for its travel insurance: a mix of self-insurance for claims, buttressed by cover from an insurance company if an agreed threshold was exceeded. Despite an annual increase in that threshold, it was breached two years in succession. As a result, the insurers increased the premium. "The insurers were certainly making a loss," says Willingham. "I could fully understand why they wanted to increase the premium, but I felt they were over-correcting." The insurer that Save the Children switched to also used a medical assistance provider whose services the charity wanted to employ. The new insurer offered a better price and slightly better cover. "There were three factors, of which price was only one," says Willingham. "Unless there had been a big difference it would not have been the deciding factor. It's worth paying a bit more if you get what you want."
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