Charities are refocusing their efforts and business models away from simply relying on donations and towards building mutually advantageous partnerships with businesses. Michael Tripp asks whether the insurance industry can share their vision.
The summer of 2011 has been gloomy in more ways than just the weather. Not only was the August sunshine regularly obscured by gathering clouds, the economy’s faltering recovery was also suppressed as Greece’s financial woes escalated into a full-blown crisis of confidence in the Euro, while across the Atlantic, the US administration tied itself in knots trying to raise the country’s debt ceiling and other fears affected sentiment.
At the time of writing, billions of pounds have been wiped off the value of global stock markets and the prospect of the much-touted double dip recession looms like a chilly if somewhat premature autumn.
For the UK’s 265 000 charities, the situation is particularly precarious. The donations they depend upon are extremely vulnerable to deteriorations in the economy, and a new study published this month revealed that more than 2000 charities across England had their funding cut or withdrawn by local councils. All of this at a point in time when many charities were hoping that the worst of the recession was behind them.
The fact is the recession has inflicted grave wounds on the country’s charity sector — something specialist charity insurers know only too well. To gauge the scale of the problem, Ecclesiastical asked charities how they were faring in the wake of the recession. Just under a quarter were either merging or consolidating their charity with another, while 14% were faced with downsizing or closure.
Tellingly, over half felt that financial services organisations had a moral duty to increase their charitable giving, perhaps because society has judged that the banks were responsible for the crisis in the first place.
Clearly the charity sector is experiencing seismic change. The harsher the economic climate, the more deep-seated and radical these changes are likely to be. Adversity is the breeding ground for change. At the same time the need for responsible contribution to our society informs our sustainability and values. What the private sector can do under the ‘Big Society’ banner is also a driver for change.
So, what does this mean for the insurance industry’s relationship with the charity sector? Viewed simply, the insurance industry interfaces with charities in two ways. First, as the sector’s risk carrier, offering protection for its physical assets, its people and its liabilities.
Second, as one of the sector’s principal corporate partners, offering money, resources and expertise as a way of discharging our corporate social responsibilities.
Every year, I am personally involved in reviewing and renewing Ecclesiastical’s corporate partnerships with a range of charities. Other insurers go through a similar process. The objective is to create the most effective relationships we can, but the seriousness and commitment with which we approach the matter indicates the high priority our industry places on these relationships.
The issue, however, is that the nature of these insurer-charity relationships is changing — whether the market is aware of it or not. The recession and its aftermath is forcing charities to rethink their operating models, their staffing, their distribution chains — in short, virtually every aspect of their organisation. They are, in effect, engaged in a struggle for survival that is leading them to shine a spotlight on all activities, including their corporate partnerships.
Social enterprise is a term that has entered the lexicon of the charities, but has yet to find lasting traction with the bulk of insurers. It reveals something about the new mindsets emerging among the charities — a move away from a reliance on traditional donations and fundraising to perhaps a more equitable relationship between charity and corporate partner. It shows they recognise their wider role: to serve society as a whole as well as their own area of community interest.
Similarly, some enlightened businesses such as Google, IBM and Unilever have begun to think in terms of shared value, rather than charitable donations — creating a direct connection between the progress of the company and that of society. For a food company, that could mean refocusing its efforts from creating better-tasting products to more nutritious ones. For an insurer, it might translate into playing an active role in crime prevention. This is an aspect of sustainability in its widest sense.
A new model
The challenge that now confronts the insurance industry is to find a new model for its relationship with charities and voluntary organisations — ideally one that suits the charities and not just insurers’ need to perhaps tick some boxes on the corporate social responsibility report.
It is time to begin asking some big questions: what type of relationship do charities want? How successful do they believe their interactions with the insurance industry have been in the past? And, from a risk perspective, does this newly emerging breed of charity have a different risk profile from its older counterparts? If so, how can risk management work to mutual advantage?
Finally, some questions to ask ourselves: is the insurance industry’s charitable activity driven by a genuine desire to promote positive change, a sense of duty or a need to build customer-friendly brands? It may be doing the right things, but is it doing them for the right reasons? Do insurers really want to make a positive and lasting difference to the world around them in a sustainable and unselfish manner — to help those who may find themselves trapped or unsure about how to help themselves?
These next few years will be a watershed for the insurance industry’s relationship with the UK’s charitable sector. This is an opportunity to take the lead; if not the sector may find itself playing catch-up with partners that have taken a bold leap forward. The economic fallout of the recession may still linger, but the path ahead as far as the charities are concerned is plain to see. Let us hope we can share their vision to create robust and sustainable partnerships that go far beyond the simple rattling of a collection tin.
Michael Tripp will be speaking at the British Insurance Summit 2011.
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