On June 27, voluntary organisations will meet the Association of British Insurers (ABI) to discuss ways of overcoming the increasingly uneasy relationship that exists between the two. The insurers will hear hard-luck tales of unfair new clauses and massive hikes in premiums. Whether they
respond with anything more than sympathy is doubtful given their own chronic difficulties.
In the language of underwriters, insurance is suffering "a hardening market
caused by the combined effects of an increasingly litigious society, the demise of independent insurers and the fallout of 11 September terrorist attacks.
David Sinclair, policy officer at the Charity Finance Directors' Group (CFDG), which is hosting the ABI meeting, admits the situation has grown considerably worse this year. "I did a small straw poll of our members and found that on average they are facing increases in premiums of between 30 per cent and 100 per cent,
The CFDG describes its mission as "promoting excellence in financial management for charities", but even charities which achieve that goal are discovering they're not immune from a sudden and sharp rise in insurance fees.
The stories range from the disturbing to the absurd. Coram Family, England's oldest children's charity, pays professional indemnity cover for protection in the event of a client or beneficiary suffering financial loss as a result of its advice. As an organisation committed to improving the lives of children, it isn't in the business of offering financial advice yet the local authority insists on such cover as a condition of funding.
What was an annoyance suddenly became more serious this year when the policy increased from £3,000 to £10,000 a year. Jackie Bliss, director of finance and administration, says: "It is completely daft. Our brokers have been telling us for years that we don't need this cover but the local authority insists we take it out and has even been pressuring us to increase it.
Not-for-profit community groups were recently forced to stop work after getting caught up in a dispute between the British Trust for Conservation Volunteers (BTCV) and Ecclesiastical Insurance.
As an umbrella body, BTCV negotiated favourable rates on behalf of its 2,500 associate groups. But when BTCV came to renew its policy in the spring, it had been amended to state that no group that had been in existence for more than three years would be eligible for cover.
After discovering the new criteria was non-negotiable, BTCV agreed a new policy with Zurich Municipal at double the price but not before some groups had been left without cover while the situation was resolved. BTCV spokeswoman Wendy Tobitt says: "It came as a shock to the groups, particularly as we were only given two weeks' notice."
Ecclesiastical spokesman Toby Barker believes some community groups only attached themselves to BTCV to take advantage of Ecclesiastical's nominal insurance rates and, as large groups in their own right, should have been negotiating their own premiums. The BTCV deal, he claims, was only meant for small organisations.
"In some cases we were offering several millions of pounds' cover for tens of pounds,
says Barker. "That's not something we can sensibly do."
Some groups, he adds, were involved in potentially dangerous activities such as scuba diving. "Not everyone was involved in what you might consider to be traditional conservation activities such as meeting on the village green to collect plastic bottles from ponds,
says Barker. He claimed Ecclesiastical had only recently become aware of this.
Tobitt suggests a serious accident involving a child on a BMX track run by a community group last year "had drawn attention to the fact that not everyone in our network is involved only in bluebells and bat boxes".
The case highlighted the growing mistrust and lack of understanding that exists between insurers and voluntary organisations. "Insurers and charities need to get together so we can discover the problems they face and find out what we can do to minimise risks so they feel more comfortable with us,
"The voluntary sector on the whole probably isn't aware of how serious the situation has become, but I'm sure we're not alone in what we have been through. The insurance market is changing and we are having to face the brunt of it."
Barker points out that the insurance industry is also facing increased costs for reinsurance and it is merely passing that on. "Everyone is looking at their accounts and making sure they aren't over-exposed,
Clive Moulson, director of Zurich Municipal, adds: "The insurance market is under pressure at the moment. Some companies are blaming the events of 11 September, but this is only one factor. Our increasingly litigious society, property damage caused by storms and floods and an increasing trend of arson attacks on public buildings have all placed pressures on the insurance industry.
Bankruptcy, merger and core activity has led to insufficient competition.
Sinclair says: "One aid agency said there are only three or four companies that provide the cover it needs to work overseas. They have switched every year to the point where they have used them all."
Sinclair hopes this month's meeting will be the start of a fruitful dialogue, but until then his advice is simple: "Shop around or use a broker."