There has been some debate in recent months about whether the sector has become too professional, but Ashley Hepburn, insurance manager at the British Red Cross, believes that insurance and risk management are areas where it could take an even more professional approach.
"The charity sector does lag behind others," he says. "We need to be a bit more commercial and professional in the way that we do things. Just because we're a charity, we're not off the hook in terms of protecting our donors' bank details or steering clear of bribery, corruption or abuse claims. Like any other entity, we are obliged to have that under control."
Hepburn has been in his role at the charity for four years; he also chairs the charities specialist interest group at the Association of Insurance and Risk Managers. Before joining the BRC, he worked as an insurance broker in London and in Melbourne in his native Australia.
He believes that more charities, especially larger ones, should consider following insurance practices more commonly seen in other sectors. He cites the example of captive insurance, a form of self-insurance in which firms - mainly large multinational ones - set up a separate insurance company to cover any losses. The parent company determines the premiums it pays and the types of activities it will cover. Captive insurance companies are generally set up offshore because of the tax benefits.
Hepburn says: "It can be a cost-effective way of managing your insurance and it gives you control over your programme, but you do need to have a big programme."
Smaller charities that manage their risk well should consider raising the excess charges they are willing to agree to if they want to bring down their insurance premiums, he says. "If the charity is managing its risk well, that can be a really cost-effective way of managing its insurance," he says.
Finding ways of reducing their premiums could become a pressing issue for more charities in the future. Insurance premiums have remained relatively low for the past 10 years, thanks largely to a competitive marketplace: but some insurance experts believe that this 'soft' market might change soon (see page 26).
"The traditional cycle is three to four years of a soft market followed by the same length of time of a hard one," says Hepburn. "But we're now in about year 10 of a soft market. Conventional wisdom says it must harden, but we've been hearing this for the past couple of years and it hasn't done so far. Maybe a particular event - such as the crash of a major insurer - will rock the market."
Hepburn believes he is one of only about 10 dedicated insurance managers working for charities. He says that responsibility for insurance generally falls to people who perform other roles for charities, such as the finance director, facilities manager or the head of the legal team. This can be difficult for those individuals, he says, but it doesn't necessarily place them at a significant disadvantage when it comes to getting a good deal or gaining the appropriate cover.
"Most charities will use a broker to buy their insurance, " he says. "At British Red Cross, we get excellent advice from our broker - it is a big international firm and understands the market very well.
"There are some really good charity teams at medium-sized brokers as well. They understand that cost and protecting a charity's reputation are important, and that the person at the charity isn't an insurance expert. They have to act more like an in-house adviser."
But Hepburn believes charities need to make more use of the data available from their insurers and brokers. "Insurance companies and brokers hold lots of data on the types of claims they handle" he says. "This is useful information for your risk management - for example, there might be many lifting accidents in your charity shops, so you might want to consider providing more manual handling training."
Keeping a close eye on your insurance claims and taking steps to reduce risk is a wise investment of time, adds Hepburn. "Ultimately, the less an insurer is paying out in claims, the better the deal they'll be able to offer you the next year," he says. "And the less money you spend on your insurance premium, the more you can spend on helping your beneficiaries."
2010: Insurance manager, British Red Cross
2007: Account executive, OAMPS Insurance Brokers (London)
2006: Assistant account executive, OAMPS Insurance Brokers (Melbourne,
2003: Claims executive, CGU Insurance