Insurance companies are understood to be offering special deals to public and fire authorities to discourage them from joining recently-launched mutual insurance schemes.

A mutual scheme was launched last month for fire and rescue authorities. It is expected to collect £4m in premiums in the first year.

A mutual for the London authorities began in April and is expecting to collect £8m in premiums.

Ten London boroughs are currently members of the London authorities mutual. It is open to all 32 boroughs.

A source within the mutual sector said insurers were offering companies special rates to encourage them to continue buying insurance from the commercial market.

A spokesman for public sector insurer Zurich Mun-icipal said: “We exist in a competitive market place. Only through a genuine tendering process can the true competitiveness of the com-mercial market be understood.

“Customers have the option to test the market but it is unlikely that this option will be available to individual mutual members.”