Insurers have been signing up top clubs to launch a range of financial products to the fans. Stephen McDowell reports
Marks & Spencers, Virgin, Asda and Sainsbury's might all be aiming to be among the new breed of financial services providers. Yet their efforts could soon be kicked into touch by a new breed of upstarts - football clubs.

Clubs such as Derby County, West Ham and Nationwide first division leaders Nottingham Forest are among the first out of the financial services tunnel. The advantage to fans is that they can support their club by buying something as mundane as motor insurance. The advantage to the club is that it costs them nothing - and they get a chunk of free marketing to boot.

At present, they only offer branded household and motor insurance. But this is seen as something of an experiment and, if it works, you could well see these and other big-name clubs offering a wider choice of financial products. In the longer term, some of them are hoping to expand by selling "off the shelf" pensions, life assurance, insurance and investment products to their fans, or even offering them credit cards and loans.

The driving force behind the latest soccer-branded products comes from Direct Club Insurance Services, an insurance broking firm run by Phil Zeidler, which has set up a call centre much like any other direct broker and for the past month has been steadily signing up Premiership and First Division clubs.

Other clubs have played with the idea. Crystal Palace, for example, had a stab at offering general insurance products to their fans with Palace Direct, via a brokerage called Torch.

As Mr Zeidler says, the idea has failed to take off on a large scale up to now. Part of the problem lies in that general insurance requires a combination of competitive rates and the ability to accept as large variety of insurance risks as possible - everything from ageing grannies to 18-year-old drivers. That generally precludes many insurance companies, leaving the field to brokers.

But, Mr Zeidler adds: "[The market] is so competitive that [profit] margins to the insurance broker are tiny, especially if you are giving money back to the club. You cannot make it work unless you can handle very large volumes of business. Only one club, even the big ones, would struggle on their own to make it work."

There has also been a certain shyness among clubs to get involved since one of Scotland's biggest clubs, Celtic, had its fingers very badly burned over its much publicised Celtic PEP.

Following on, as Mr Zeidler intends to, from relatively successful sales of motor insurance, the club, with the backing of the Prudential, launched the Celtic PEP in 1996.

The club received commission from every fan who signed up and, within months, 20,000 of them did so. The PEP was sold by an independent financial adviser called Caledonian Investments which, in a further twist, was owned by Paul Goodwin, nephew of Celtic and Scotland footballing legend, the late Jock Stein.

However, within a few more months the Fraud Squad was called in after more than pounds 500,000 went missing from clients' funds. Mr Goodwin was sentenced to 18 months imprisonment last year for his part in the fraud.

"Football clubs are very cagey and very protective of their brands," says Mr Zeidler, "Especially since the Celtic affair. But very few of them are aware of their marketing power. Post the Taylor report in 1990 - published the year after the Hillsborough disaster - there has been a change in the clubs and a change in the nature of the fans. Some 72 per cent of Premier League fans are in the ABC1 category now."

Manchester United, with one of the biggest fan bases of any club side in Europe, are a case in point. Some experts believe the club could make millions by diversifying into financial services. However, a spokeswoman says loftily: "Any link between financial services and Manchester United would be confidential and not for discussion." Watch out for the Man Utd PEP, then.

In insurance terms, said Mr Zeidler, there are underwriting advantages in that the affinity with a football club generates volume and repeat business and makes it worth while. Each time a policy is sold the club gets around pounds 10. So far, 2,000 football fans have called Direct Club, which he operates, for quotes and more than 200 have signed up for some form of insurance cover.

But Mr Zeidler is holding back from persuading clubs to launch their own branded investment products. "That's where the money is," he said, "But it is more controversial and the clubs are a bit reluctant to do it. We retain the facility to be able to do it, however."

So, is insurance from football clubs good value? The answer is that it appears to be at least as competitive as mainstream cover from some big providers.

For a 30-year-old single professional man living in London and driving a three-year-old VW Golf without a no-claims bonus, Derby County quoted a fully comprehensive price of pounds 728.28. This slotted roughly into the middle, with the highest - Guardian Direct - at pounds 786.83 and the lowest, through the AA, at pounds 638.02.

One of Direct Club's first customers was David Clayton, the promotional manager of Nottingham Forest, who put Mr Zeidler's claims to the test.

"To my surprise, my wife and I managed to save around pounds 200 on our household insurance, which was a major saving for us. Professionally, this is good for the club too, it helps extend our brand and our range of services and enables us to give something back to the fans."

Stephen McDowell works at `Financial Adviser'.