Opportunities and dangers on the Web

The range of goods you can now buy on the Net is huge, but poor service and the threat of fraud has also increased

Getting information from the internet is like collecting a glass of water from the Niagara Falls - and choosing financial services from it may soon be the same. The number of people running a current account via a PC or buying insurance via the Internet has not so much grown as exploded in the last 12 months, and it is easy to see why. Interest rates on good online current accounts are attractive and using accounts is easy. As far as insurance goes, the choice is wider and the costs are usually lower than buying traditionally. What is more, the process is very fast.

Getting information from the internet is like collecting a glass of water from the Niagara Falls - and choosing financial services from it may soon be the same. The number of people running a current account via a PC or buying insurance via the Internet has not so much grown as exploded in the last 12 months, and it is easy to see why. Interest rates on good online current accounts are attractive and using accounts is easy. As far as insurance goes, the choice is wider and the costs are usually lower than buying traditionally. What is more, the process is very fast.

Inevitably the internet carries dangers. Anyone can put a website on this vast electronic noticeboard, though the main fraud dangers come with investment. If you have the slightest doubts about the security of a website you can always revert to the phone. Only use credit cards where companies have a full encryption service to protect details from passing into hackers' hands.

Banking online can be wonderful if you stay clear of the systems set up directly by the high street banks. Two groups - Smile and Cahoot - may be subsidiaries of the Co-Op Bank and the Abbey National respectively, but act independently - and pay attractive interest rates on funds they hold. Smile pays 4.85 per cent on current account money, and Cahoot provides 6.5 per cent, though that falls slightly if you do not go the full electronic hog - by holding a cheque book. Those rates may be high, but Cahoot insists it will keep its present rate at least until June. That provides a massive contrast with Barclays. Its internet current account pays interest at 0.1 per cent. In the past, the giants could relax, knowing apathy would ensure people were more likely to get divorced than change their bank.

Insurance via the internet has also soared. The industry claims about 100,000 were bought through websites last year, and this year's total would be four times as high. A recent MORI survey showed that 2 million people had visited financial websites - so sales figures via the Internet are almost certain to climb sharply as potential customers begin to feel at ease with the system.

Several groups including Screentrade, Egg, Virginmoney and Moneynet offer a financial supermarket online, covering motor policies, home and contents insurance and holiday cover. Admittedly, they do not offer details of every plan in the business, but nor do most insurance brokers. Screentrade has 20 "associate groups" whose rates appear, while Virginmoney has 27.

The mechanics of buying perhaps a motor policy work just as they do on a company website. You key in all the details listed on the screen questionnaire about your car, your address, driving history and no claims discounts, and Screentrade will flash up the best six or seven rates available. Virginmoney's service, linked with AA Insurance services shows three that include a 5 per cent discount. The great point is flexibility. You can save the figures or screen and key in other details, such as including your student son as second driver, or paying the first £250 of any claim to see how they effect the price.

All big insurers have websites, but costs vary. Charges for a contract from Royal Sun Alliance are the same, however you buy it - even if the selling costs using the Internet are much lower than those elsewhere. Norwich Union is very different, offering a 10 per cent discount on household, motor and travel policies bought on the net. Meanwhile you can collect a 5 per cent discount from Direct Line as an internet buyer - except for motor insurance where the group actually made its name.

In future, insurers look set to sell far more types of policy over the Net than they do now, including medical insurance. Already Legal & General offers the most basic form of life insurance - term cover - which insures you for a fixed 10 or 15 years. That will expand the market still further - and the pressure to cut bills for internet customers will do the same.

Good links

www.virginmoney.com

www.egg.com

www.smile.co.uk

www.cahoot.com

www.charcolonline.co.uk

www.screentrade.co.uk