Broker looking for sole provider

The UK's biggest personal lines broker, the AA, has drawn up plans to ditch its panel of 23 insurers in favour of a sole provider deal.

Market sources revealed that former financial services head Clare Salmon responded to a consultancy report that came down heavily in favour of a solus deal.

The plans were put on hold after the takeover of the AA by venture capitalists CVC and Permira.

But the appointment of Kevin Sinclair, who has an underwriting background, as insurance director has fuelled speculation that a change to a sole provider deal is the AA's next priority.

Insurers with most to lose by the deal are NIG and Lloyds TSB, the lead insurers on the AA's motor and home panels respectively. The AA has about 1 million motor and 750,000 home policies.

A market source said: "A sole provider deal will give the AA's finances a capital boost as the insurance partner will work out prospective income over the period of the deal, normally 10 years, and give the AA a portion of that up front."

According to the source the down payment could be anything up to £200m, dramatically decreasing the estimated £1bn debt incurred in the deal to buy the AA from Centrica.

A spokesman for the AA said: "While the previous management team identified a range of strategic options for the direction of the insurance business, these are not at an advanced stage and if appropriate, will require more detailed evaluation and review."