What is it with direct writers and banks, are they desperate for business, or just plain incompetent.

I understand that insurance is a competitive business and the direct writers and banks are entitled to contact our clients to offer quotations and to try to undercut us.

In all fairness, I relish competition, it keeps us on our toes and stops us getting lazy in our job. However, I have lost count over the years as to the number of times that a client has approached us, both at renewal and mid term, with a quotation from their bank telling us that they can save huge amounts of premium for the same cover, often amounts well in excess of 50%.

Without sounding dramatic, I would say that in at least 99% of the time the reason for the huge saving becomes evident very quickly - they undercut us by offering much reduced cover without the client knowing. What sort of way is that to do business.

Once again this week such a situation occurred. A client of long standing has a home work policy with us. During the past 24 months he has suffered two claims, the last one being a large burglary claim while he was on his honeymoon.

Naturally, all he had to do was put the matter in our hands and we took care of the rest - which is where brokers come into their own of course.

I was, thus, very surprised when he phoned and told me that his bank had offered him a quote to take over his insurance mid term through the year.

Normally, I would have been annoyed that after all the help we had given him that he should even consider getting a quote elsewhere. But to be fair he was just remortgaging his house with that bank and it had pressured him into letting it quote.

The reason he took it seriously was because it had quoted him £524 a year as against our policy of £1,124.50 per year. For that even I would have changed to them!

The client, however, being someone who trusted our judgment highly, asked me to look through the quotation.

He had apparently told the bank everything and had given it the original Homework policy to work from. Therefore he was 100% confident that the cover was like for like.

Below is our analysis of the bank's offer of cover.

Robert Starr
Seico Insurance Consultants

The quotation showed one claim, the burglary in July 2005. However it did not include the claim in April 2004 for a Laptop. In fact the bank even allowed a 30% no claims discount on its quotation.

Business cover
Having read the banks quote it was clear that it was aware of the business use at the premises. However, all this meant was that it was aware of the business use, it did not mean that it was covering the business activities.

In essence this means that my client would have no cover for public liability, products liability, employers' liability, business interruption loss of profits, and business legal expenses. What would happen if a client came into his home and was injured during a visit, how much could he sue him for? Literally a million pounds.

Our policy is a home work policy which means it covers his business activities as well as his household; the bank covers his household and only acknowledges that he runs a business, rather than covering his business.

General cover
Aside from the business use, his policy with use gives accidental damage to buildings and to contents. The policy with the bank did not give accidental damage to either building or contents.

So, in essence, the bank was saving him over 50% in premiums, but at the same time reducing his household cover substantially, not including a claim which would give rise no doubt to it refusing a claim on non-disclosure, and it was leaving him completely uninsured for his business.

A lot of clients would have simply taken the bank's quote assuming all was correct and would have left us with the thought that we had no doubt been overcharging them all these years.

In reality, if we quoted on the same terms as the bank then we would have undercut its premium by over £100.00.