Opinion: Hot issue - Has the rise in insurance costs been excessive?

A survey by Volunteering England has shown that three-quarters of respondents have suffered a sharp increase in insurance premiums. Some commentators feel that the rises have exceeded a level that can be justified.

YES - IAN HARRIS, not-for-profit sector leader, Z/Yen risk and reward managers

In the past couple of years, insurance prices have tended to stabilise and fall for the types of risks voluntary sector organisations normally insure.

The Volunteering England research indicates that insurance premiums have risen significantly for the sector. In 2003, Z/Yen researched voluntary sector insurance extensively. Then, the insurance industry attributed rises in voluntary sector premiums to general market conditions. The voluntary sector should, then, have enjoyed the price reductions enjoyed by other sectors in 2004 and 2005.

When we tried to encourage the insurance industry to look at the profitability of its voluntary sector business separately, the industry claimed it was inconvenient. At the risk of sounding harsh, insurers perhaps see the voluntary sector as a soft touch.

Most voluntary sector organisations have precious little comparative information, and yet they still need to buy insurance. Perhaps now is the time for the sector to pick up on our 2003 recommendations - benchmark insurance prices and claims records as a sector and take action, as a sector, to aggregate premiums, share risks and the management of risks.

The voluntary sector needs to get smarter in its approach to insurance.

NO - CHRIS LEES, chief underwriting manager, Ecclesiastical Insurance

There have not been widespread excessive increases in recent years. Where there have been large increases, these might reflect a charity's claims history or a dramatic change in its income or activities - or even a greater degree of understanding by insurers of the risks involved.

It is true that, in the present climate, liability rates cannot stand still. For example, inflation of bodily injury claims is moving ahead at about 10 per cent a year - faster than more traditional measures of inflation, such as average earnings or the retail price indices.

Legal costs are also moving ahead each year, and represent on average about 40 per cent of the total cost of an employers' liability claim.

Finally, society is becoming more litigious - the introduction of conditional fee arrangements has made it easier for people to bring legal actions.

However, there is still a lot charities can do to keep rate increases to a minimum. Much of this revolves around the management of risk to minimise claims. Charities should recognise that insurance is still a competitive market, and shop around.

YES - SEMRA O'REILLY, director of human resources, CSV

In the past two years, the insurance costs at CSV have increased dramatically - particularly in relation to life insurance.

For the financial year 2003/04, our premium was 89p per unit, or £24,312.

In 2004, our then insurers were taken over by UnumProvident. UnumProvident continued to provide cover during 2004/05, but could not confirm what the premium would be.

Our brokers, Barker Poland, told us that it would be the same as the previous year. However, in September this year it declared that the premium for 2004/05 would be £1.34 per unit, bringing our premium for the year to £60,000.

After much negotiation, it agreed to reduce the premium for 2005/06 to £1.09 per unit. But this still brings the total premium to £40,000, a huge increase from the figure two years ago.

YES - Major Bill Cochrane, secretary for communications, Salvation Army

Excessive insurance costs can really dent valuable donation income for any charity, particularly smaller ones.

The Salvation Army is in a unique position in that it has its own insurance company, which was set up in 1909. This enables us to keep our insurance premiums on buildings and contents stable, and all profits from customers through the company are reinvested in the Salvation Army.

The Salvation Army General Insurance Company continues to offer competitive rates to any customer, as well as offering valuable service to the charity and an additional source of income.

The particular area in which the Salvation Army has experienced steep increases in cost is liability insurance, which has risen fourfold in the past four years. Although there have been very few claims against us, no voluntary organisation doing large-scale voluntary work is impenetrable to those who would break codes of practice and behave inappropriately towards a client.

Although there is a sliding scale on when an organisation is or is not liable, this area is particularly worrying in terms of potential payouts for any voluntary organisation.

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