'It’s not the same as working in a bakery'

Providing insurance for not-for-profit organisations, such as charities and churches, may sound simple enough. But the very different needs and risks of the businesses within the sector make insurers and brokers reluctant to enter into it.

Access Underwriting managing director Simon Hickman insures a drug and alcohol rehabilitation charity, an organisation that he says would make other brokers wary. “There are several risks, such as employees handling needles. The charity needs to make sure that staff operate in a sterile environment and that the risks are managed very well.

“The charity also needs to protect their workers, so we have to cover people who are working with clients who are under the influence of drugs and alcohol. It’s not the same as working behind the counter in a bakery.”

Ansvar Insurance (an ethical general insurance company and a subsidiary of Ecclesiastical Insurance) was one of the few players prepared to enter the sector early on. “We moved into charity insurance nearly 13 years ago and were one of the first in the UK to identify it as a specific niche,” head of insurance operations Mark Ingram says. “Companies originally shied away from providing cover, as they saw it as a difficult area because of the diversity of what charities do. There was little understanding from the mainstream insurance market about their needs,” he says.

A few brokers – including Access, Endsleigh, Finance ReDirect and S. Saunders & Co – have followed into the market over the years, mainly looking to diversify and obtain new clients.

Specific needs

So what are the types of insurance products that charities and other not-for-profit organisations look for? First, they need cover for their premises, employees (voluntary and permanent), and vehicles such as the minibuses they use to transport goods or ferry people around in. Trustees’ indemnity insurance has also become important, as it covers trustees in the event of financial loss or if the trustee conducts or is accused of a wrongful act.

Ansvar has created a number of products, including Charity Connect, Starter Connect, Community Groups, Special Events and Trustee Indemnity, which it markets and distributes through brokers. “We have launched a new

e-trading platform and four of our products are available online. Brokers can create links from their websites to Ansvar’s online products and can get quotes online 24/7. So we cater to a more web-savvy customer,” Ingram says.

The company’s core product Charity Connect, which offers buildings, contents, employers’ liability, public liability and trustees’ indemnity insurance, is not yet available online, so brokers can get quotes by telephone or email.

The Community Groups product offers insurance to smaller or less-established organisations, such as as clubs, groups and societies that use hired premises to meet in but need basic cover such as public liability insurance.

Ansvar added products as it found that charities needed more than just cover for buildings and employees. It now offers, for instance, its Special Events product to cover for injury to the public, damage to property, and liability arising from the sale or supply of goods.

To cover against financial loss and any wrongful acts conducted by trustees, charities can obtain cover through its Financial Indemnity product. This also allows them to cover any legal expenses that may arise from employment disputes (including compensation awards), bodily injury negotiations, criminal proceedings or investigations by any statutory body.

It can also provide cover for loss of reputation, by providing funds to pay for public relations services to counter any adverse publicity. Ingram says that this is “a very similar product” to general directors’ and officers’ cover.

Potential for growth

Although the not-for-profit sector is still considered a niche area, brokers and insurers specialising in the sector are confident about the potential for growth. For instance, according to the Charity Commission, almost 180,000 charities are registered in the UK, with a further 5,000 joining them every year.

Ingram believes that this number could be doubled if smaller voluntary groups formally registered are taken into account. He also believes that about 20% of charities have no insurance at all.

So how viable is it to enter this niche area? Certainly, for some brokers it has not yet become a core part of their business, but it is an area which has shown promise.

When Simon Boyle took over S Saunders & Co in 2001, the company had only a handful of not-for-profit clients, but now has close to 100 on its books, gathering premiums of £125,000 a year – although he admits this is small fry compared with other books of business.

“Our schemes for security companies and insulation companies dwarf the not-for-profit product. However, we feel there is potential in this area,” the director of the Manchester-based company says.

Access has increased its clientèle more rapidly. It entered the area in 2002 and now has around 300 church and 2,000 charity clients. “We added 700 new clients to our books for the 2009 financial year, and since January this year have acquired 360 [new clients]. So our growth in new business is accelerating and we project to have around 1,000 new clients this year,” Hickman says.

He attributes this success to his company’s marketing. He says that Access uses a number of techniques, including internet marketing, advertising and direct marketing. Some clients are also referred through word of mouth.

“We are good at marketing to organisations; we have good solutions and we work hard to meet their needs in a competitive way, while at the same time providing them with the right cover.

It’s not just a question of slashing rates but to ensure that clients are insured properly,” Hickman says.

Ingram says that any broker wanting to enter the not-for-profit sector must have tenacity and commitment. “It’s not just about being able to provide a wide range of competitive products and appropriate advice for charities; it’s also about showing empathy and being prepared to develop relationships over time.

“It’s more than just a commercial opportunity. You have to provide a consistent approach and the highest levels of customer service to support groups and organisations that make such a positive contribution to society.” IT