Regional brokers are set to become the big winners in Royal Bank of Scotland's (RBS) plan to sell more small business insurance through NIG.

But the strategy is bad news for other insurers focusing on the small business market, including AXA, Norwich Union and Groupama. It is feared that RBS could start a price war.

RBS dominates the banking market for UK small businesses through its Royal Bank of Scotland and NatWest brands. But, according to sources, RBS will not try to sell commercial insurance to its small business customers through its banking network. "After seeing how Lloyd's TSB fared in selling small businesses insurance through its branches, RBS has chosen not to take that route," one broker said.

Instead, RBS intends to leverage off NIG's strength in the broker market.

Under the plan, brokers who have agencies with NIG will be given the details of RBS's small business banking customers.

In return, the brokers will be "encouraged" to place business generated as a result of the leads with NIG.

"As the agent of the client, brokers will be obliged to offer a range of quotes," the broker said. "I imagine NIG will be quoting some very competitive prices."

Alexander Forbes, SBJ, Opus, Thompson Heath & Bond, Alec Finch & Co, Smart & Cook, Layton Blackham, Giles Insurance Brokers and Stuart Alexander are among the brokers with large books of NIG business who are set to benefit from the plan.

A RBS Insurance spokeswoman said it was too early to talk about its strategy for NIG.

"We are in the process of sorting out structures," the spokeswoman said. "Nothing has formally been announced in any direction."

RBS acquired NIG as part of its acquisition of direct insurer Churchill, which was finalised on 2 September.