Car cover on the superhighway

Insurance firms are gearing up to sell cut-price policies on the Internet, writes Paul Gosling

Motorists can cut as much as 15 per cent off the cost of car insurance by using the Internet to buy their policy. Eagle Star Direct has launched what it claims is the first fully interactive car insurance- selling operation on the Web.

Internet selling is an extension of the existing phone-based direct selling services from several of the major insurers. Eagle Star is offering a 15 per cent discount to car owners for buying on the Internet, reflecting the lower costs involved, on top of its standard discount of 10 per cent for paying by credit or debit card. Home and travel insurance products are set to follow.

"We said we would wait to see the response before deciding whether to launch other products, but the indications are that it is successful," says Andrew Baud, an Eagle Star spokesman. "Within two weeks we had issued 15,000 quotations, and those were not to people idly surfing [browsing on the Internet]. We had sales of policies in the low hundreds."

Several other insurers are about to launch similar cut-price products. Guardian Royal Exchange already offers cover for home computers through the Internet, while many other companies have sites for promoting products, inviting browsers to leave personal details so quotes can be dispatched by post. A survey by Ernst & Young, the accountancy firm, found that 71 per cent of financial services companies, including insurers, intend to sell their services over the Internet.

Lack of security is often blamed for the slowness in the take-off of Internet commerce, but these problems are being overcome. The quality of encryption - the code used to disguise transmitted information - is about to improve, and this should reassure most consumers. The problem has, in any case, been overstated. People who give their credit card details over the phone, say for theatre bookings or to order goods, are as vulnerable to fraud as those who quote their numbers on the Internet.

A more realistic concern is the growing number of Internet sites that claim to offer investment opportunities; many of these are scams. The Securities and Investments Board (SIB) last month issued a warning about the growing incidence of confidence tricksters setting up copycat sites on the Worldwide Web. These dummy sites copy the logos of legitimate companies but introduce false information, including fake Web addresses and phone numbers. Similar names can cause confusion: the title Global Asset Management, for example, is being used not only by the London fund manager but also by a Ghana-based company.

SIB warns investors to be aware that anything that looks too good to be true probably is. Potential investors should check Web addresses and phone numbers to see whether they "look wrong". Even legitimate investment operations based overseas are best avoided unless the investor is aware of the regulatory system the deal will be subject to, and what their rights would be were anything to go wrong.

"Pyramid selling" frauds are frequently transmitted by e-mail. These are akin to chain letters, except that each person who joins has to pay someone higher on the list a sum of money - perhaps pounds 10 - on the promise that several times this amount will be paid out to each participant. Inevitably the schemes collapse, leaving later joiners out of pocket.

But used wisely the Internet can save money, as the Eagle Star initiative shows. Search engines - software programs that search out the cheapest prices for standard goods such as computer accessories, CDs and books - offer the potential for massive savings. These are in growing use in the US - look at the "www.shopbot.com" site to see how they work - and will soon be a common feature of Internet trade here. It may not be long before British consumers become as familiar with the Internet as they are with the telephone.

q Addresses to look out for on the Internet: "www.eaglestardirect.co.uk; "www.nationwide.co.uk" - an award-winning site that allows users to apply for services, including savings accounts, home insurance, credit cards and mortgages; "www.barclay- square.co.uk" - an Internet shopping mall that sells Barclays' services and gives access to Sainsbury's, Royal Sun Alliance, Argos and other home-shopping sites; "www.gre.co.uk" - Guardian Royal Exchange's site which offers computer insurance and plans to offer other insurance products; "www.esi.co.uk" - Electronic Share Information's award-winning site for a selection of share prices and share management services; "sale.cddirect. co.uk" - direct selling of computer CDs (ie not music); "www.independent.co.uk" - the Independent and Independent on Sunday can be read on-line.