The emergence of a claims culture in recent years has led some charities and voluntary organisations to cut or limit certain activities because of the cost of insurance. Activities involving children or large numbers of volunteers have been particularly vulnerable to cuts because of concerns about the risks involved.
But organisations that respond to the trend by adopting a more professional approach to risk management can keep premiums down, according to Paul Bloxham, the underwriting director of Ecclesiastical Insurance. He says the key is setting out clear policies and procedures for risk management. "This can help to limit potential claims and keep premiums down," he says. "There is much more knowledge and understanding in the sector about the need to plan for and manage risks, which leaves these charities in a much stronger position when negotiating insurance deals with brokers and insurers."
Ecclesiastical, which was originally founded to insure churches, now insures charities and social enterprises. Its policies include trustee cover and charity public liability insurance. Bloxham says it is important for trustees to review their insurance cover regularly because a number of specialist providers in the market now offer both tailor-made products and standardised offerings. Charities, he says, should consider carefully if the policies they are being offered really meet their needs.
"Not all insurance products are equal," he says. "Some insurers have designed policies to meet the specific needs of charities, whereas others will provide only their standard commercial combined offering."
Among the trends affecting claims that Bloxham highlights is the recent spate of redundancies in the voluntary sector, which has exposed charities to an increased likelihood of industrial tribunal actions. "Legal expenses insurance can provide protection against the legal costs and awards made by a tribunal," he says.
Bloxham says the difficulty that some charities have experienced in recruiting trustees has also encouraged boards to consider trustee indemnity insurance, which covers the personal liability of trustees.
Looking ahead, Bloxham expects to see more standardisation of insurance products for small charities and a greater number of these being offered as online products. "This means that smaller charities won't need to spend time and effort on searching for a tailor-made, complex insurance package, but could simply buy it online," he says. "They will still be getting a specialised charity insurance product, but in less time and with less effort."
But premiums are likely to cost more, he adds. Inflation in claims costs will continue to rise and some of this cost will be passed on to policy holders. Bloxham warns, however, against the possible false economy of automatically choosing cheaper insurance. "Understandably, charities want to spend as much as possible on their charitable activities and many are under a lot of pressure in today's environment," he says. "But organisations need to be cautious about opting for the cheapest insurance because in times like these it is even more important to have the right cover in place."