Concerning Broker Talkback in the August 14 edition of Money Marketing, I would like to correct an apparent misunderstanding regarding the use of risk assessment specialists and take the opportunity to explain our underwriting philosophy.
Magian Underwriting seeks specialist risk assessment reports on a small proportion of the firms which are proposed to us and, generally, those are risks that on the basis of a proposal form only are teetering on a declinature. While our proposal form is very detailed, it cannot tell us the whole story and in cases where there is an element of doubt as to acceptability of the proposer, the risk assessment report is an extremely valuable underwriting aid.
The majority of reports conducted to date have led to a quotation being offered that, in every single case to date, has incorporated a premium discount (generated by the contents of report) that paid for or exceeded the cost of the review.
Magian Underwriting recognises that IFAs will always be susceptible to claims, a result of the work they do and the influence of the regulators, consumer organisations and the media. The increasingly litigious nature of the public (encouraged by the bodies mentioned above) only adds to the problem. It is, therefore, in our view of little value to seek to underwrite only those IFAs which will not suffer complaints or claims. We therefore focus on compliance-led firms which recognise that adherence to professional standards can only improve the quality of the firm and that therefore treat FSA regulations as a minimum and not a level to aspire to.
Such firms will doubtless suffer complaints and claims but their complete, written records will increase their chance and the mutual's chance to successfully defend such actions.
Occasionally we require the comfort of a specialist risk report to confirm to us that the firm proposing to us is of this level of quality.
An important element of the duty of Magian Underwriting to the board of the mutual and its membership is the identification of professional firms so as to ensure, as far as possible, that the overall membership is of similarly high quality. It is therefore likely that the use of risk assessment reports will increase in frequency as we identify and build a relationship with suitable experts.
We accept that not every one-man band and smaller firm will be keen to deposit up to £3,000 without a guaranteed quotation being available and that is where quality and completeness of the initial proposal submission is of paramount importance.