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Home Office Active Community Unit , Final Report, No T001/ACU-CSD/03,
By Alison Millward Associates with Rawlings Heffernan Consultancy Services and Lucas Fettes, 19 June 2003
For the full text of this report and related materials from the Home Office's Insurance Cover Working Group, please go to http://www.homeoffice.gov.uk/comrace/active/icwg/index.html.
Alison Millward Associates, with Rawlings Heffernan Consultancy Services and Lucas Fettes insurance brokers, were commissioned in March 2003 by the Active Community Unit (ACU), to undertake a study of the:
Report work was undertaken in England. The findings however should prove of interest to a wider audience, as the insurance problems identified will be common throughout the United Kingdom.
The ACU set up an Insurance Cover Working Group (ICWG) in 2002 to investigate the insurance problems being faced by VCS organisations, and it was this group that steered the study.
Semi-structured interview schedules (see Annex II) were used to interview a range of individuals from VCS organisations, local authorities, the Charity Commission, insurance brokers and insurance companies (see Annex 1). The main concern was to elicit, from these interviewees, some practical solutions to the problems, temper them with the interpretation and evaluation of the study team, and then present the revised list as a draft Action Plan for further consideration by Home Office ministers and the ICWG.
Government has firmly stated its commitment to ensuring that voluntary and community groups are able to play a full role in our society and to helping them grow bigger, stronger and more confident (Home Office, 2002).
Government sees itself as playing the role of an enabler by providing a framework and support within which volunteering and community action can thrive. The setting up of the Active Community Unit (ACU) with a budget of £188 million to invest in local communities and the provision of £125 million for the new futurebuilders investment fund, to help voluntary organisations in their public service work, are practical expressions of this commitment.
A recent major cross-cutting review of the role of the VCS in service delivery (HM Treasury, 2002) underpinned this commitment and recommended:
Various studies in recent years including this one have identified the following insurance problems being experienced by the VCS:
These problems have created nothing short of distress for VCS managers and volunteer organisers throughout the country, as illustrated by the quotes included in the main report.
"I would like to share some of the pain I recently had to undergo in trying to get our insurance cover renewed….our brokers left it until two weeks before the renewal date to contact us….insurer was refusing to renew cover…….I had to continually chase the brokers………in the end I conducted my own independent enquiries……faced an increase from £2100 to £5000 despite being claim free in past 6 years……eventually got it for £2300 from a company new to us…this sector of the insurance market requires urgent action."
Faith group
The motivation of volunteers is being severely undermined and all of this is compromising Government's targets for strengthening and expanding the VCS and volunteering activity. VCS umbrella organisations consider the Industry's behaviour towards the VCS to be worthy of castigation. All those we interviewed and many who responded to the ICWG consultation paper, stress the need for something to be done now before people withdraw their time from, and commitment to, the VCS.
The Insurance Industry has been in a state of turmoil in recent years as a result of many factors (eg September 11th, the collapse of the Independent Insurance company, increased catastrophe losses, poor stock market performance, conditional fee arrangements ie no win no fee, new claims categories such as stress and sick building syndrome). These have led to huge losses. The strategies the Industry has used to overcome its difficulties ie restrictions on cover and increased premiums, have been applied to all sectors of the economy, not just the VCS.
The Insurance Industry has a major influence on the viability of VCS organisations in terms of both provision of adequate cover and premium setting, which is sustainable for the individual groups. Having said that, the response of the Industry to the VCS issues was on the whole disappointing.
Many Insurers lack understanding of the sector and as a result are reluctant to provide cover. They prefer to involve themselves with risks that have a large degree of uniformity in terms of the activities undertaken and the processes taking place.
Risk management has become the major focus of attention in the Insurance Industry. Insurers are attracted to business where Health and Safety and Risk Management are maintained to a very high standard. Good working practices and effective training and supervision are considered to be of paramount importance. It was clear that the VCS suffers from the perception that the people involved tend to be well meaning volunteers with a lack of understanding regarding risk assessments, health and safety responsibilities and the management of risk. Evidence suggests this perception to be without justification.
Many insurers are not prepared to offer cover for liability classes in isolation and this has had a very detrimental effect on small voluntary and community groups where there are no assets that could also be insured.
Larger organisations, within the VCS, will be considered for cover by most insurers as they are perceived to have the organisational structure and skills to ensure compliance with legislation and risk management practices. However those working in the care sector, whether it be with the young, the elderly, or the vulnerable in society, continue to face huge difficulties as insurers are wary of the potential for claims to manifest themselves many years after the event (eg accusations of abuse).
There is inertia within the Industry and despite comments that insurance is cyclical in nature, it is highly unlikely that we will see a dramatic improvement in both the availability and pricing of liability insurance cover for the foreseeable future.
The general view amongst members of the ICWG was that the majority of local authorities have been trying to distance themselves from the insurance difficulties VCS organisations have been facing. They too have faced spiralling insurance costs and have been trying to minimise the number of claims being made of their insurers. If they are not able to retain control over a VCS organised activity, they are frequently not prepared to assist with insurance for that activity. Yet, a primary role of local authorities is to maximise the use of premises and equipment for local communities.
On a more positive note we found a number of local authorities to be using a variety of helpful strategies including:
A series of practical solutions which could be actioned, by the various interested parties in the insurance for the VCS issue, are outlined in section 11 of the main report. These include:
Government
Insurance Industry
Local Authorities
VCS organisations
This report will be recommended to Home Office ministers for action in June 2003. It is published at a time when a number of other studies are coming to a conclusion. This is therefore a particularly good time to start to tackle the problems and with all the interested parties. Government in particular has a unique role to play in bringing the interested parties together and facilitating dialogue, but also in making provision where others cannot.