Helping the helpers

As more charities become the subject of official investigations, proper insurance cover is increasingly important

In a charity, ultimate responsibility lies with the trustees. They have to ensure that their organisation complies with legal requirements on independence, fundraising, transparency and acting in the public interest.

According to a September report from the Charities Commission, however, too many trustees are making basic management mistakes that leave their charities at risk of fraud, abuse or an official investigation from the regulator.

With that in mind, Hiscox has launched a new Charities Insurance Portfolio that will provide all the cover a charity needs in one simple policy, including the costs of investigation.

The Charities Commission’s third annual report said that the failure of some trustees to properly govern charities, as well as poor financial management, continued to be the most common areas of concern in their investigatory and compliance work.

There are more than 150,000 charities in the UK, with a combined income of more than £50bn. According to the report, the overwhelming majority are run competently. However, new assessment cases increased by 625 over the 2009/10 financial year, a change arising mainly from the Commission’s work to check the eligibility of charity trustees.

“The Commission looks to make sure that charities act in the public interest,” says Joe Brown, Specialty Commercial Underwriting Manager for UK and Ireland. “If the board members are all from the same family, for example, and there are possible conflicts of interest and question marks over where donations are going, then there may be an investigation.”

Covering the costs
Of the 2,615 assessment cases closed by the Charities Commission during 2009/10, 37% involved serious governance problems such as poor decision-making, conflicts of interest and unauthorised benefits to trustees. With a regulator keen to ensure that trustees govern effectively, it’s important that charities cover themselves for the cost of any potential investigation, which is where Hiscox comes in.

“Having one insurer offer a single product to cover the range of risks that charities, their trustees and their volunteers face will reduce the risk of a charity having potentially expensive gaps in its insurance,” Joe says. “Whether a charity finds itself under investigation by the Commission or a member of the public is injured at one of its events, it will be protected by the policy.

“It’s really a package offering a whole range of covers,” he adds. “Charities and their trustees can be sued for a number of reasons, from libel or infringement of intellectual property as a result of articles they have published, to being sued by employees let go by the charity who feel they have been treated unfairly.”

The new product also features full theft cover, allowances for both public and employer liability and PR costs for crisis containment. Charities have the option to add on extras, such as event-specific covers, where necessary.