Cover blown open

Online insurance is growing in popularity. But can it be trusted?
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The Independent Online

When it comes to buying insurance, online super- markets are the new obsession of the financial services industry. Each site claims to be independent, offering quotes from a range of insurers, enabling customers to find the best price without the hassle of having to contact each company separately.

When it comes to buying insurance, online super- markets are the new obsession of the financial services industry. Each site claims to be independent, offering quotes from a range of insurers, enabling customers to find the best price without the hassle of having to contact each company separately.

The number of people enquiring about insurance on the internet accounts for one-third of all personal finance enquiries online, according to find.co.uk, the financial website directory.

Internet bank Egg hopes to cash in on this demand - it launched its own car insurance supermarket on Friday. But there are already doubts about just how autonomous the site really is. The best quotes we got came from - surprise, surprise - Prudential, its parent company.

Egg says this is pure coincidence, stressing that the site is completely independent. "We have carried out significant testing, the results of which suggest that the Prudential will not be underwriting the majority of [the site's] business," says Phil Ashkuri, deputy director of Operations at Egg Intermediation. Egg will not reveal who it does expect to underwrite the greatest proportion of its business, although Equity Red Star is a possible candidate.

The Prudential denies that there is anything untoward about the tactics being employed to provide quotes. "The motor insurance market is extremely volatile but, unlike many of our competitors, we have not seen our premiums rise in recent months," says Nigel Bruce, head of product marketing at Prudential. "In particular segments of the market we are very competitive and are delighted that, with the quotes you got, you have identified the areas in which we are particularly competitive."

The difference between the quotes on the Egg insurance supermarket is significant. One of the quotes - from Prudential - was £230 less than the next best quote, from Equity Red Star. Rivals claim Egg could be operating the site as a loss leader, a process whereby providers initially lose money on certain products in order to attract customers.

"This doesn't indicate an independent site at all," says an industry insider. "It looks as though they're going to be pushing their own products and are governed by their parent company. The proof of the pudding will be whether they can keep their customers."

In a notoriously fickle market, Egg has seen customers abandon its savings accounts in droves after rivals introduced better interest rates. Egg has also suffered with its credit card - the interest rate crept up from 9.9 per cent annual percentage rate (APR) to 10.9 per cent without warning.

Egg hopes to build a comprehensive financial supermarket providing customers with a full range of financial products. Egg will also offer home and travel insurance by the end of the year.

"We want to bring best-of- breed products on to our supermarket shelves," says Alistair Milne, chief executive of Egg. "Our quotation system makes the whole process of shopping around for insurance quotes much less onerous. We will be setting the standards and are concentrating on ease of access, navigation and strong price competition."

Egg is so confident that its panel will provide quotes which are market leaders that it offers a price guarantee. Anyone who finds a cheaper quote elsewhere will be refunded the difference, plus £1. Its panel consists of nine insurance providers, including Prudential, Equity Red Star, Groupama, Norwich Union and Royal Sun Alliance. This is quite limited but Egg claims it is adequate. Screentrade, another online supermarket, disputes this. It has 22 members on its panel. "We will extend this further in the next month so we can give better prices and even more choice," says Paul Charles, editor-in-chief at Screentrade.

Screentrade has a price promise and is confident it can provide leading premiums. It will be adding a link to Egg's site so that customers can compare quotes. "We are confident our quotes will remain the most competitive," says Mr Charles. "We'll add Egg to the list of competitors on our site and I challenge Egg to do the same."

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