Deciding on insurance

Insurance may become an increasingly large component of an incorporated association's expenses.  Although it may be tempting for an incorporated association to decide that certain non-compulsory insurance is unnecessary, therefore reducing insurance expenditure, some non-compulsory insurance may be essential to the future viability of the association. 

An incorporated association should consider the cost of non-compulsory insurance against the risks covered by that insurance in the context of the activities carried out by the association.

An incorporated association may wish to engage a qualified insurance broker to assist it to put in place an insurance programme that suits its requirements.  Whether using a broker, obtaining insurance directly or obtaining insurance by any other means, it is important for an incorporated association to discharge its duty of disclosure to the insurer prior to obtaining insurance.  The insured (i.e. the incorporated association) is under a legal duty to disclose to the insurer any matter known to it – or that a reasonable person in the circumstances of the insured could be expected to know – relevant to the decision of the insurer whether to accept the risk and if so on what terms. (This is the same duty of disclosure that is required by any person arranging his or her home or motor vehicle insurance.)

A failure by an incorporated association to discharge its duty of disclosure to an insurer could enable the insurer to reduce the amount paid in respect of a claim or even decline to pay the claim altogether.

As a word of caution, an incorporated association should note that an insurance policy might not entirely cover the risk that is being insured for. Often, a policy will be subject to exclusions (eg for fraud), be limited to a maximum aggregate claim amount or a maximum amount per claim, and will often require excess payments to be made on claims.

An incorporated association should conduct, on a regular basis, a thorough review of its activities and risks in order to assess whether its existing insurance program provides appropriate cover.