Smaller intermediaries are feeling the pinch from car dealerships giving away free insurance with new V registration models.

More than 400,000 new cars are expected to be sold this month as a result of the registration change, according to the Society of Motor Manufacturers.

And many of these cars have had the benefit of free insurance, including models made by Fiat, Rover, Citroen, Ford and Vauxhall.

But some intermediaries complain these give-away deals are costing them vital premium income. Donald Davies, principal of E. Davies & Co in Newtownabbey, Northern Ireland, said: "Quite a number of clients have sent in their insurance certificates for cancellation on the basis that they have bought a new car and no longer need cover from us."

He added that free insurance deals lasting longer than one year were a particular concern because they took away renewal business.

However, Graham Masters, marketing manager for Norwich Union, did not think brokers' renewal business was being significantly affected.

"After the initial free deal, new car buyers would be seeking to renew their cover," he said.

He added that many of the free insurance packages were in fact put together by larger brokers on behalf of motor manufacturers. Aon confirmed it has been linked with Ford until recently.