Getting your insurance spending priorities right

Charities face a variety of financial pressures on different fronts. So if income’s falling, it makes sense to try and shave costs to help balance the books. But which costs to cut or compromise on? What about cutting insurance costs?

With all of a charity’s expenditure the trick is to discern between what’s dispensable with and what’s vital. And that means deciding between what you can and can’t cut back on safely, without suffering damaging consequences. Because if you get cuts wrong, they can prove very costly indeed. So could hard times ever justify a few tweaks to reduce your charity’s insurance premiums?

Reducing cover

Perhaps you’re tempted to reduce your level of cover, or to put on hold a certain policy you’ve never had to claim on before. But don’t throw caution to the wind and take the chance that nothing bad is going to happen.

It would be a wrong move because there’s that word: “risk”. Insurance exists to take risk out of the equation for you. Once you’re covered, the insurer bears the risk – so if that bad thing does happen, the associated costs are theirs and not yours.

That makes insurance a precarious thing not to have enough of. Because the costs of dealing with a claim can run into really big money. Think about it: lawyers, regulatory investigations, fines, compensation. None of that comes cheap and paying for it can easily eat up your reserves and more.

So if there are going to be a few tweaks in your insurance, it should be to make sure you have the right covers at the right level. While it’s important to find a provider with an intimate understanding of the sector, who can make getting the right policy simple, don’t just let the provider do all the thinking for you.

It’s also important to be familiar with what covers are available, so you make an informed choice – including which insurance is a legal obligation. With that in mind, here’s a run-down of the covers that are a good fit for charities, plus how they can protect you.

Public liability

Public liability is the go-to cover for most charities because so many of them have contact with the general public. This might mean anything from actively helping individuals on a daily basis to holding occasional fundraising events.

But whatever’s involved, there’s always a risk of injury to people and their property. Say a visitor to your fun day breaks an ankle after tripping over a cable that’s been left trailing. Or a volunteer visiting someone at home spills coffee over their iMac.

Like it or not, we live in a “where there’s blame, there’s a claim” society, and simply hoping someone’s not going to come after you for damages won’t cut it. Most people will want compensating for your mistake. And the fact you’re a charity and a force for good won’t keep you immune.

Remember, you’ll have to deal with a claim whether you think it’s justified or not. It won’t go away on its own. But public liability insurance helps by covering the considerable costs – including paying for legal expertise to fight your corner, and picking up the tab for court costs and any compensation awarded.

You need to make sure what you’re doing is safely covered by your policy though. Usually the wording flags up any potentially high risk activities as a no-no – bouncy castles, firework displays and anything involving heights or water, for example. So check your documents carefully.

That’s not to say you can’t ask for your public liability insurance to be tweaked to cover such pursuits. So always make sure to contact your broker or insurer if, say, you’re planning a special event that includes some risker activities than usual. You don’t want to leave yourself exposed.

Also, be aware that your policy will state how many people are covered for an event – usually up to 500. If you’re expecting greater numbers than your policy allows for, it’s important to arrange to extend your cover. Otherwise your insurer will be within its rights to refuse claims.

Staff and volunteers

If your charity has employees and you don’t have employer’s liability insurance, you’re breaking the law. Simple as that. It also puts you at risk of the Health & Safety Executive (HSE) fining you £2,500 for each day you didn’t have the right cover. So, a false economy, as well as an illegal act.

Worth thinking about also is the fact the HSE places volunteers on a more or less equal footing with paid staff – suggesting a responsibility to cover them too. It’s a bit of a grey area, admittedly. But there’s also the whole issue of whether it’s a moral obligation for charities to protect those who give up their time freely to help.

What employer’s liability insurance does is to act as a two-way shield if anyone working on your behalf or their property is injured as a result. Say a volunteer helping at an event is badly scalded by boiling water from a faulty tea urn and has to take time off work to recover.

Employer’s liability covers the legal costs of dealing with the claim and also pays compensation to the victim. It can take care of medical bills as well, and pays costs to defend you if you’re prosecuted for breaching regulations.

Trustees and officers

If your charity has trustees, the bad news for them is that they’re personally financially liable if things go wrong. A trustee’s role means they take responsibility for the direction your charity takes and the decisions it makes. That goes for directors, committee members and officers too.

So, if there’s an accusation that your charity’s done something wrong – like funds weren’t used for their intended purpose ¬– trustees and officers will quickly find themselves in the line of fire. They’ll have to defend themselves against the claim and possibly pay compensation or fines.

The amounts involved can get very large. Thus if it’s all coming out of your own pocket, it can spell disaster. Trustees’ insurance, however, picks up all the costs and can help stave off financial ruin.

Advice and services

Professional indemnity insurance comes into its own if your charity offers advice or provides services. Because if it does either of those things, there’s always the chance someone will claim that what you did or advised caused them harm. They’ll demand compensation as a result.

Maybe your charity helps people get back on their feet after becoming unemployed and you advise someone to invest their redundancy package in setting up a new business. But the business fails, they lose all their money, and then claim it was your bad advice that set events in motion.

Again, that means defending the claim – which also means lawyers, court costs and possible compensation. Professional indemnity insurance covers the lot, allowing your charity to continue its good work even while the claim rumbles on in the background.

Systems and data

There are other types of cover you can get to reduce your charity’s chances of taking a massive financial hit. Cyber insurance, for instance, covers the cost of repairing the damage following a hack or breach. It’s useful if your charity depends heavily on your network and websites for operations and fundraising.

That’s because cybercriminals can bring everything to a standstill simply by infecting your systems with malware. And the implications are serious. Because your website being down can put the kibosh on fundraising, while a network problem can throw your everyday operations into chaos.

The other danger is a data breach. If you store your supporters’ personal information digitally and those details are stolen by cybercriminals, it can put you in trouble with the regulator, damage your reputation and lead to claims for compensation.

Cyber insurance can’t stop you from being targeted by hackers, but it can help deal with the aftermath and get you back to normal as quickly as possible. It pays for technical expertise to identify the breach and restore your systems, and covers dealing with the regulator and informing anyone affected by a data leak. It also covers any claims for compensation and buys crisis PR to defend your reputation.

Playing it safe

So, it’s crucial to give careful consideration to what insurance is right for you. Think about what your charity does and what risks it faces. Then think about the type and amount of cover you need – and what you can and can’t do without.

But don’t cut corners. Even though your finances may be struggling, chipping away at your charity’s insurance is the equivalent of punching holes in your own safety net. Whereas a policy might cost you a few pounds a month, a substantial claim can set you back thousands of pounds. And that’s the very definition of a false economy.

END OF ARTICLE

Return to top of page

NEXT ARTICLE

Next Article
LatchamCGL advert