3 important charity insurance checks for non-experts
If you’ve been renewing your charity's insurance over and over for the last few years, a review is most likely well overdue.
However, chances are you’re no insurance expert, so how can you do it justice without having the specific knowledge?
Here are 3 simple things you can check that will ensure you’re giving your insurance arrangements due consideration and providing sufficient challenge to those upon whose advice you ultimately rely.
#1 - the ADVICE check
Perhaps you’ll start by asking yourself “Are we covered for everything we need?” and it’s a fair question that charities should ask. The fact you have to ask the question at all could suggest that there’s a gap in the advice you’re receiving from your insurance provider. Shouldn’t you at least be able to answer that in general terms, even if you’ve engaged someone to arrange the cover on your behalf?
It’s therefore a question that you need to be happy you broadly know the answer to and it might prompt several more while you’re at it, such as:
- Do our insurers really understand what we do as an organisation?
- When were we last challenged to review and update our insurance programme?
- Has our cover been explained to us enough that we’re confident in our protection from a weather-eye point of view?
- Do we have periodic dialogue that includes support and advice, or do we just receive a renewal invoice each year?
Too frequently, these and other uncertainties arise from a lack of engagement by providers. Yet you’re paying them to take care of this stuff for you and relying on them to quite a degree.
Proper advice in the context of insurance is just as vital as that which you would expect from a lawyer or accountant. So it’s important that your insurance professional spends as long as it takes to fully understand the activities your charity carries out and assess where you might be vulnerable. You’ll get a sense of whether they’re doing that by the questions they ask you.
In any case they should be communicating their findings to you and demonstrating that they are addressing those risks as part of their proposed solution.
If your provider isn’t driving that discussion with you, maybe take the lead and press them to account for their efforts.
It may be of course that you’ve purchased cover online and there was no advice offered – you simply entered details on a website and up came the price. This is called a ‘non-advised sale’ and the onus is on you as the policyholder to decide whether the cover is suitable for your needs. If you’re not an insurance expert, unless your activities are very straightforward, how can you know?
A review is a good time for you to gain an understanding of your cover and how it applies in practice. A transparent hand-hold from a professional brings you along on the journey, means you’re involved in your protection to an appropriate level and should inspire confidence in the advice you’re receiving. And that’s what you’re really seeking, in conjunction with these next two checks…
#2 - the PRICE check
Here you’re looking not just at the cost of the cover but also whether you’re benefiting from value-adds such as a good quality, efficient service; ongoing support; and professional advice.
You need to be satisfied that you’re getting true value for money. So determine whether your provider is actually making a contribution to the relationship by adding value or merely acting as a conduit between you and the insurer, taking their cut.
Sound advice and fit for purpose cover needn’t cost the earth but the consequences of getting it wrong could be game-changing for your charity and your beneficiaries. Whatever you pay, if it’s for the wrong cover or an incomplete service, it’s a waste of money. Paying the right amount for the right result is not.
Again, you want to be convinced that your provider is doing something to earn your money and your loyalty. Are they searching the market for you periodically to compare prices against others or are they assuming you’ll renew at whatever cost? That second approach will be evidenced if you just receive an annual invoice without dialogue.
You can do your own price-checking if you have the time but just be careful that you’re actually comparing like-for-like and that you don’t flood the market with quote requests, especially as the not-for-profit sector is quite specialised, as that could work against you.
The most appropriate level of challenge is simply to ask your provider why they have made the recommendation they have and to provide the rationale for the pricing, particularly if there’s an increase over previous years - obviously.
#3 - the THIN ICE check
This is potentially the most important of the 3 checks you can perform because it’s about where the rubber hits the road. This is the bit that will determine your survival following a claim and, therefore, warrants the most attention – “Are we going to be OK if something goes wrong?”.
So where do you start? This might sound obvious, but it’s crucial for you to have a discussion with insurers around your basic legal structure and who’s doing what and in whose name.
Maybe joint ventures and collaborations appear to limit your liability in theory but how will that work in practice if, for example, negligence is proved?
It’s also quite common, but potentially dangerous, for charities to assume they’re protected by the insurances of others (at a venue for example). This is a minefield and you should never make an assumption – your insurance provider should be ready, willing and able to explain how your cover works in practice having made a measured professional assessment of your contracts and activities.
A review creates the space and time to realign your cover with your aims and activities and to avoid undue exposure to risk.
Your charity activities may have developed significantly since your last review or the risk landscape may have changed. Without a regular review, your cover won’t have kept pace unless you’ve initiated the conversation with your insurers along the way.
A review gives you the opportunity to look to and consider the future. Maybe you have the desire to work in new areas. Maybe you’re planning to meet the needs of your beneficiaries by offering a new service. Your charity can suddenly be transformed through a single, positive event that raises your profile and brings about significant, lasting change. Planning for all the consequences of that becomes possible if it emerges in the course of an annual renewal discussion.
Some charities have trustees or volunteers who "used to work in insurance" and it may be OK to ask them to oversee your insurance arrangements. However, particularly in relation to more recent exposures such as abuse and cyber liability, there's no substitute for engaging the help of someone whose knowledge and experience is constantly evolving.
We'd particularly recommend caution when switching insurers as you may inadvertently lose some significant cover if the wordings are not checked and compared thoroughly.
Charities are often more complex and diverse than they first appear, with inherent exposures to legal liability and other losses that are not always obvious. Making sure that’s matched with appropriate protection requires a considered, thought-through approach from a qualified insurance specialist - perhaps even tailoring a bespoke, rather than off-the-shelf, solution. In the end it’s for you to decide whether you’ll put in place certain covers or not, but we would counsel you to do so from a position of strength, through informed choice.
There are some key benefits to your charity of conducting an insurance review from time to time.
The name of the game is to be convinced in your own mind that both you and your provider have taken more interest than just casting a cursory glance at your renewal in passing.
You need to be confident that you’ve provided some challenge to them and that they’ve done the same to you in investigating your requirements. A provider worth their salt will welcome the interaction because it gives them the reassurance that risk is on your radar.
Your insurance cover should demonstrate that the provider has understood your activities, applied thought to the perils you face from a real-world perspective and provided a solution that is both fit for purpose and cost-effective.
By reviewing your charity insurance needs you have the chance to be involved in arranging your cover and to make sure you're keeping your provider appraised of your activities. You can’t know everything and it’s not your job to double-check everything you’re being told. However, armed with these few tools you should feel more confident than ever and able to make that informed choice. Working together in partnership with your insurance provider to achieve your aims gives your charity the best chance of success and won’t allow you to be derailed by an unplanned event.