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Magian could hit IFAs with charge of up to £3,000

IFAs applying for professional indemnity insurance from Magian Mutual could find themselves hit with an upfront charge of up to £3,000 before Magian decides if it will offer them cover.

Magian claims that the fee is currently only charged to a minority of applicants which are undergoing risk assessments because of the nature of their business but the company predicts that in the future, more firms will also be hit.

The average cost is bet-ween £2,000 and £2,500 but in some cases it could reach as high as £3,000.

Those deemed to be an acceptable risk will see the amount charged offset against their premiums but those who are rejected will not receive a refund.

The policy has been introduced because, as a mutual, Magian says it only wants to underwrite good risk to minimise any liabilities incurred by members.

PI brokers have also defended Magian&#39s decision, saying that most commercial insurers would simply reject IFAs they were unsure about rather than investigating further.

Magian Mutual director Glyn Morris says: “If the report is favourable, we do build in a discount into the rating process.

“In fact, I would suggest it is greater than the amount they pay for the review in the first place.”

Collegiate Insurance marketing director Fergus Chappel says: “I suppose this could be viewed as one of the strings attached to their proposition but, in my experience, they do not always ask for risk reviews and if there are any questions, they are quite right to do so.”

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