Is charity the best policy?

Help the Aged and many other charities offer insurance. But do clients necessarily get a better deal? Kim Hunter reports

You don't have to spend your valuable free time searching for a decent insurance deal. You could simply phone the freephone number on the junk mail sent by one of the burgeoning number of charity providers, and rest assured. The charities' foray into financial services is not new - the National Trust formed its link with financial advisers Frizzell, for example, in 1988 - but it is growing rapidly. Some, such as Amnesty International, see financial service provision as the solution to a funding squeeze. For others it is one of the charity's core services.

Either way, it makes money, usually through a standard donation from the insurance company (or, these days, fund manager) for each policy. The British Diabetic Association has budgeted pounds 100,000 this year after costs from its specialist insurance programme. The National Trust's more affluent membership has indirectly donated pounds 2.5m through Frizzell, with a projected pounds 500,000 annually from Green Flag motoring assistance. Help The Aged calls its income from Sedgwicks "significant", while Amnesty International has raised pounds 100,000 through its PEP, and its insurance target for 1997 is pounds 50,000.

However, there is no point in the public handing over money for insurance and investments if they are not competitive products. So just how hassle- free a route is this? Where the target group is also the membership - the age organisations; the British Diabetic Association (BDA) - its insurance products will be tailor-made to the needs of that group. BDA, and its partner Co-operative Bank Financial Advisors, cuts through the need for endless repeating of medical histories for diabetics to get insurance quotes.

Working with the specialist insurers London & Edinburgh, it has been able to gain special concessions on motor, life and home insurance. BDA's own figures offer travel insurance (two weeks in Europe, for travellers under 65 years) of pounds 22.86, pounds 14.94 less than the next cheapest for the same cover.

"Insurance is a cost sell these days," says Gary Jacobs, a broker at Hanover Park. "The quotes will be competitive. If they're not, they don't want the business."

"There is a great deal of mistrust in financial services," says Stefan Kuchar, a senior manager with Help the Aged. "But here, we are in the driving seat. We can force them [service providers] to provide standards that meet our clients' needs."

Standard insurance company practice is to spread premiums across risk groups. By bulk marketing to one risk group, however, charities are able to relate premiums to the particular risks involved.

So, for example, some of the NT's products were voted best buys in a recent Which? magazine survey. Amnesty International compares itself with Direct Line. When David Coe, the charity's fund-raising director, switched to London & Edinburgh, he saved pounds 80 on household insurance and pounds 60 on car insurance, despite having added his wife to the policy.

Charities are starting to consider an altogether trickier proposition: financial services proper. Amnesty introduced its members to Friends Provident's Stewardship ethical PEP long before it considered insurance. Others, including the Royal Society for the Protection of Birds, are set to follow.

The potential difficulties centre on the fact that legally, unless a charity is tied to one provider, an independent financial adviser (IFA) must make a recommendation to members; the charity can act only as an introducer. It cannot advise members to switch out of an investment if it starts to generate poor returns.

And to cater for its less wealthy membership, Amnesty is adding the non-ethical Scottish Widows Minimum Investment Plan to the list. But there is some concern about the process. An IFA's job is to consider how suitable an investment is for an individual financial profile. It is difficult to do this from a distance.

Kay Patrick, commercial development manager at the RSPB, which hopes to launch a range of products next year, has two potential solutions to this problem. Either it will plump for a relationship with one provider that offers a whole suite of products, possibly at a discount, or it will link up with an IFA, which is legally bound to give best advice, and will add a donation to the RSPB into the bargain.

Age Concern's development director, Tony Page, has spent six years working on the problem, but has not come up with a solution. He does, though, have some strong boundaries: "I would never allow Age Concern to be used as a badging device, because it would sway people. We would be involved only if we felt we could add materially to the interests of the over-55s group we serve," he says.

So, buy your insurance from a charity by all means. But if you are considering their life assurance, or savings and investment products, do your homework. Buy only something you would have considered without the charity link- up

Age Concern: (home) 0345 697610, (car) 0345 125816, (travel) 01883 834887. Amnesty: (home/car) 01903 69411. British Diabetic Association: (home) 01903 264464, (car) 01903 262900, (travel) 0171-512 0890. Help the Aged: (all cover) 0800 413180. National Trust: (home) 0800 272525, (car) 0800 581817.