Bank to sell motor cover

FIRST DIRECT, the pioneer of telephone banking five years ago, has announced its first new product, selling car insurance over the telephone. The service was launched in a small way last week and goes public tomorrow. It is not exactly a surprise move and comes only after a quarter of its banking customers have already asked First Direct to offer them car insurance. House and contents insurance, health and life insurance are sure to follow.

Direct selling of car insurance is 10 years old now and well established, with a score of players following in the footsteps of Direct Line. Well over 50 per cent of the 13 million motor insurance policies in Britain are now sold and serviced by telephone.

Direct sales teams can undercut the established car insurance providers by 10 to 20 per cent simply because they have lower staff and administrative costs, and increasingly through bulk placing of the underwriting risks, either with Lloyd's motor insurance syndicates, with panels of underwriters drawn from the established insurance companies, or in some cases with in-house companies. But Peter Simpson, First Direct's commercial director, believes that with the advantages of half a million established banking customers to provide a market base First Direct can win business away from established direct sales companies as well as the rump of the traditional business sold through brokers.

Much direct sales business has tended to come from the young, the successful and upwardly mobile, and has tended to have a strong bias towards London and the South-east. Direct sellers have tended to target the prime, low- risk business, and shy away from young drivers, the old and those with previous form. First Direct intends to target a wider range of customers by quoting a broader spread of premiums. It will also offer a consistent standard of service in the event of claims, says Mr Simpson.

The service is based in Leeds, West Yorkshire, and is available on 0345 100101 charged at local call rates between 8am and 10pm, seven days a week. A 24-hour claims helpline, a legal protection scheme and a key recovery service are also available, and First Direct bank account holders can pay the premiums from their accounts.