Direct Line and Churchill are to drop prices on the low risk sector of the motor market in response to increased competition from rival esure.

Insurance Times has learned the initiative was discussed and agreed at board level within Royal Bank of Scotland Insurance and is in the process of being implemented.

Though the move was shrugged off by esure, it has led some industry analysts to express concern it could push the market further into the soft cycle.

A Churchill insider said: "Both Direct Line and Churchill are looking very hard at esure rates and their target market.

"It is early days but the button has been pushed for this plan to be put into action."

Though esure is estimated to be about one tenth the size of Direct Line and Churchill it has been enjoying rapid expansion and claims to be the fastest growing insurer ever.

By targeting the low risk, careful driver sector of the market through advanced risk profiling and targeted marketing, esure has passed 750,000 policies in three years.

Esure chief executive Peter Graham said: "I guess we should feel complimented that they think we are that big. While it is interesting, we are not concerned.

"We feel that our brand and level of sophistication give us clear advantage over the competition.

"I do not think Churchill and Direct Line will be able to copy what we do, however we know that they check us out in terms of price," he said.

"Given what we hear I would have thought that they have their own issues internally to sort out.

"We believe they have lost a lot of good people and their morale is not all it could be."

RBS Insurance declined to comment.