Why so many more will join the insurers' revolution

The chance to dial a bargain encourages millions of home owners and motorists to arrange insurance over the phone. Simon Read asks whether they get the best deal.

David Cubbin, of Ipswich-based Colin Ryan Insurance Brokers, does not approve of telephone-based insurers. "When it comes to motor insurance, a client is in a stronger position using a local broker," he says. "Where a claim is made, the broker has greater experience and authority to negotiate a favourable settlement with the insurance company. And we give customers the choice of arranging insurance over the telephone or over the counter."

He also says that a local broker can negotiate better rates, citing research among 20 clients. That showed that the motor insurer Direct Line was more expensive in four out of five cases.

Results using such a small sample should be taken with a pinch of salt. But they illustrate the key to the success of the direct insurers. Shopping around can generally give a better deal. What easier way is there to shop around than from your own armchair at a time to suit yourself.

Direct Line, the first to offer insurance over the telephone, used that concept to launch itself on to the British public in 1985. Its original premise was simple - it provided easy-to-understand and simple-to-arrange price-cutting policies over the phone, which continued to be available after normal office hours.

Premiums were slashed as costs were cut. Instead of branches all over the country, Direct Line concentrated its resources on just one site. Computer-based quotes were instantly available.

"Since its launch, Direct Line has changed the face of the insurance industry in the UK," says Ian Chippendale, chief executive of Direct Line. "It introduced consumers to a new and efficient way of buying insurance as well as cutting prices and raising levels of service. Millions of drivers and home owners have now gone direct. But there are still millions of others who would benefit from doing the same."

Success came quickly for Direct Line. It soon found itself in competition not just with the traditional insurers but with a whole range of new direct rivals and telephone-only subsidiaries of existing firms, such as Churchill, Eagle Star Direct, Guardian Direct, and Preferred Direct. The result was cheaper insurance for all.

In order to continue getting good deals it is important to shop around. Telephone-based insurance brokers have been set up to do this for you. But bear in mind that somewhere along the line they will have to make a profit.

Peter Longstaff, underwriting manager at Prospero Direct, says: "Go direct and you can save pounds. But do compare premiums. We estimate that new policyholders can save an average of pounds 59 on their motor insurance when they join us."

All the direct insurers are alike when it comes to premium-setting. They use as much available information as possible to give quotes to customers. They also do not like anything out of the ordinary. So if you live in a thatched Elizabethan cottage or drive a classic car, they are not for you.

But if you are a more typical customer, there are a number of factors that can reduce the cost of premiums.

Making no claims will give you a discount as motorists have long discovered. This has now spread to home insurance. If your existing insurer doesn't offer it, plenty of other will take on your risk and giving you a discount if you made no claims with your old insurer for three or more years. You can also cut home insurance premiums by installing smoke alarms and security devices, such as burglar alarms. Excluding certain items such as freezer contents or bicycles can also reduce costs.

Direct insurance is now even available over the Internet. Screentrade is a new broking service offering on-screen comparisons from a number of car insurance companies.

Colin Ryan Insurance Brokers 01473 343434; Direct Line 0181 686 2468 (motor) 0181 686 8877 (home); Churchill 0800 200 300 (car) 0800 200 345 (home); Eagle Star Direct 0800 333 800; Guardian Direct 0800 282 820; Preferred Direct 0800 850 750; Prospero Direct 0800 747575; Screentrade http://www.screentrade.com