Royal and Sunalliance (RSA) is facing a potential boycott by brokers after its direct arm launched a blitz on the small business market.

RSA Business Insurance Direct has posted 40,000 letters to micro-businesses with between one and three employees. The company says it has another 40,000 ready to be sent. And in a new dual-pricing attack the letter, from manager Susan Gilchrist, criticises brokers for increasing the costs of insurance. It says: “No middleman, so the price you pay is lower.” The letter was sent to companies already insured through brokers.

Broker groups rounded on RSA. Mike Williams, chief executive of the British Insurance Brokers' Association (Biba), said: “It really looks like an attempt to undermine the relationship with brokers they talk about so much .”

Institute of Insurance Brokers (IIB) director general Andrew Paddick said: “It's bad news for the relationship with brokers. This is really going to inflame brokers.” And he said the move could backfire on RSA's otherwise popular commercial insurance package Enterprise. “RSA's competitors will be running round brokers saying ‘Look what RSA is doing – put your business with us'.”

Mike Slack, chairman of the Association of Insurance Intermediaries and Brokers (AIIB) urged brokers to boycott RSA: “I don't know why the intermediaries don't fight back and use the more intermediary-friendly suppliers. You can do it,” he said.

He urged brokers to steer clear of the big firms that engage in dual pricing. “The big boys go on trying to get more and more business direct and cut out the intermediaries,” he said, telling intermediaries to “go out and do the work to support the smaller companies that support us”.

And AIIB secretary general Chris Arter said some members had already confirmed they would switch insurers. “It's not difficult to move to intermediary-only insurers. There's quite a few likely to vote with their feet,” he said.

Insurance Times understands other major players are considering similar direct commercial operations but will watch to see the strength of the broker backlash to RSA's plans before launching.

Groupama and Allianz Cornhill insisted they would remain broker-only but NU could only say it had no plans “at the moment” and added: “How we conduct business in the future depends on the needs of our customers.” Axa was unable to comment.

RSA's commercial development director Rod Kitchen insisted the letters were not a marketing campaign but a “test”. RSA has long had a book of direct business and Kitchen announced in November plans to improve the service standards. Kitchen says RSA wanted to see if there was further demand for its direct arm.

But he and Simon Cooter, the small business manager who runs Enterprise, insisted the bulk of commercial business would come through the broker channel. “We have always recognised that the vast majority of businesses will choose an intermediary. That will be their first choice and the best choice,” Kitchen said.

Cooter said he hoped brokers would recognise the investment RSA had made in Enterprise. “But tell us if we have done something inequitable. That was not our intention,” he said. Kitchen said broker plaudits for Enterprise meant any boycott would mean brokers moving to an insurer offering worse service.

IIB leader Paddick has written to RSA boss Bob Mendelsohn after phoning the direct operation and challenging the advice being given.