Policy Master is providing the technology for the new virtual broking company, Xelector. The software house is said to be at an advanced stage of developing a technological solution that will cost Xelector "hundreds of thousands of pounds".

Steve Verrall, Policy Master's chief executive, said: "This year Xelector completed an extensive review of which software providers they wanted to work with and we are delighted they chose us."

The service is likely to be fully operational early next year. Currently, the two companies are in discussions with a number of potential panel insurers.

However, CGU looks poised to become a panel member – it is one of the backers of Xelector's parent company, enba.

Mike Dodd, Policy Master's business development director, said it will be Xelector that holds agencies with insurers. Policy Master will provide the technology only.

Xelector claimed the move would help it become a "significant player in the intermediated internet motor insurance business by the end of next year".

Xelector will start by selling motor insurance, followed closely by travel and household.