Mencap City Insurance Services is the brainchild of Roger Smythe, a management consultant brought in by the chairman of Mencap, Lord Rix, to investigate ways of increasing the charity's disposable income.
It was while reviewing Mencap's own corporate risk protection that Mr Smythe hit on the idea of starting an insurance brokerage. 'There was considerable room for improvement in our cover, so we marketed the risk in order to get the best possible terms, and saved the charity pounds 49,000 in the process,' he said.
'We realised that if we could do it for ourselves, we could do it for others. But we couldn't become brokers without compromising our charitable status. That's why we formed a separate company.'
MCIS began trading in January 1992, and by the end of its second financial year had achieved a turnover of more than pounds 2m.
The company was structured in such a way that while a percentage of each premium could be donated to Mencap, 50 per cent of annual pre-tax profits go to Mencap City Foundation, an additional charity founded by Lord Rix in 1982.
The trust was formed after Lord Rix recognised the restrictions on giving grants to new initiatives for mentally handicapped people out of money donated to the original Mencap.
He made his plans for a new grant-giving charity known in the City and the result was a board of governors that includes Helmut Rothenberg, founder member of chartered accountants Blick Rothenberg, Neville Thompson, chairman of the Greenwich Health Authority, Lord Renton, Lord Allen and Chris Ingram, chairman of CIA Group, Europe's second largest media independent.
Lord Rix, Mr Rothenberg and Mr Thompson are also on the board of Mencap City Insurance Services so that the charity has a major influence on the way things are run. They are delighted at the income it is generating.
'It was an ingenious method of raising money; absolutely splendid,' Lord Rix said. 'Everybody benefits because we are able to offer a variety of policies at a rate often lower than normal and, in many cases, provide better cover at the same time.'
For Mencap members, often discriminated against by underwriters, the household and travel insurance offered by MCIS is a welcome relief. But commercial organisations were quick to take advantage of its corporate risk and motor insurance policies too, happy in the knowledge that money which would normally go straight into someone's pocket is actually going to a deserving cause.
Now MCIS is inviting other charities to take part in the scheme. 'If they want to offer their members insurance, using us as a conduit, then the brokerage fee will go to them, while Mencap City Foundation will still get its profit at the end of the year,' Lord Rix said.
Mr Smythe, the company's managing director, firmly believes that using business activities to support society is the only way forward. MCIS is aiming to achieve annual sales of pounds 3m by September. There are 6 million people with a disability in Britain. Taking into account the families that support them, up to 10 million people could benefit from schemes such as this.
'Commercial organisations should recognise the benefit of using a charity as a brand name,' Mr Smythe said. 'Because of the 'feel good' factor, they can increase their market share at the same time as giving the charity a percentage in return.
'MCIS is able to say to potential customers: 'If we can offer you a product that you have to have anyway, of the same quality or better than your existing one, at the same price or less, will you deal through Mencap?' We have found that 90 per cent of people we quote for say 'yes'.'
Because Mencap set up a separate company, it did not need approval from the Charity Commissioners. But a spokeswoman has a warning for other trustees looking at getting involved in trading activities: 'A charity's name is precious and they should be very careful how it is used.'
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