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What the Charities Act means for your clients

The 2016 Charities Act means significant changes for the charity sector and could subsequently introduce new risks. Are your charity insurance clients prepared?

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What your clients need to know

The main headlines include giving charities the opportunity to make social investments, increasing the Charity Commission’s ability to penalise those that cross the line and, perhaps most significantly, changing how fundraising can be undertaken.

The Act was amended to include changes to fundraising guidelines. This followed an official review into recent incidents such as the death of 92-year-old Olive Cooke, who reportedly had been inundated with up to 3,000 requests for donations after her details had been repeatedly passed around multiple charities.

The Public Administration and Constitutional Affairs Committee’s report concluded that for the sake of vulnerable members of the public – and the wider reputations of charities – change would be required.

Last chance for fundraising self-regulation

A new Fundraising Regulator is the sector’s last chance to self-regulate itself in this area – with provision laid out in the Act to set up a statutory alternative or give full responsibility to the Charity Commission if it fails.
Further upheaval in the sector could negatively impact on public confidence, so it’s in charities’ best interests to ensure their fundraising practices are beyond reproach.

Some are choosing to do this by making their fundraising communications “opt-in” rather than “opt-out”, so that donors’ preferences are utterly unambiguous. While there are fears that this will lead to a massive reduction in income, Cancer Research UK’s fundraising director is more confident.

Ed Aspel told the Ecclesiastical-supported Honorary Treasurers Forum Summer Symposium that the charity’s own early ‘opt-in’ predictions of an 80% fall in donors seem to have been unduly pessimistic. Mr Aspel also noted that even if a charity’s overall number of donors does fall, so too will the costs of sending out donor communications, helping to support the bottom line.

Alternative fundraising approaches and new risks

However, this is just the experience of a single large charity. Stephen Dunmore, chief executive of the new Fundraising Regulator, has pointed out that smaller charities might struggle with the levels of strategic planning and work involved in making ‘opt-in’ a success, as they may have an insufficient “grip on their donor base”.

Smaller charities may begin to feel the pinch, due to lower incomes from phone or face-to-face fundraising. As a result, this could lead to charities exploring other ways to secure an income, which may lead to an increase in risk.

For example, charities may opt for more adventurous fundraising options, such as sponsored activity days or big set-piece events, like skydiving or bungee jumping. Fundraising events can open a charity up to new levels of public liability.  It’s unlikely that their existing liability cover will have been drawn up with these kinds of activities in mind, so it’s imperative that charities consider this. As their fundraising approach changes, their exposure to risk is likely to change as well, and it’s key that they seek advice from their broker and insurer.

Are your charity clients planning on exploring more adventurous forms of fundraising in light of the Charities Act? Would they have a suitable level of insurance if they did?

Add further value to your relationships with charity clients, through an informed discussion of their protection options. Ecclesiastical can help with our expert specialist advice. Get in touch with us to learn more.

David Britton - By David Britton, Charity Director

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