Direct insurance is increasingly the way big financial services companies deliver their personal lines insurance.

Direct insurance has been supplied for many years by company staff but this is too expensive to be a valid option in the future. Direct mail has been an option in the past but, despite high levels of expenditure, it has proved ineffective in gaining new customers.

Brokers and IFAs will survive because some products are complex and customers like to discuss their needs, but they will become increasingly part of Internet chains and their websites will become increasingly open to the public.

Banks and building societies will take an increasing share of the market as polarisation recedes and deregulation allows financial supermarkets to sell products from several suppliers.

Retail companies and other providers will continue to offer insurance as part of their mix of products, but as rebranded products from direct sales providers who offer affinity group facilities.

Pioneer direct insurers that are successful and are not yet subsidiaries or partners of the big conglomerate insurers or the big banks will soon be bought up.

Unless they have a very specific market smaller direct insurers, will not survive long because of the need to invest in new technology and reach a minimum target customer base very quickly.

Personal lines insurance will continue to be highly competitive with low margins, especially in motor insurance.

Where new profitable opportunities arise, such as in health or travel, there will be intense competition from which the customer can only benefit.

Key Note's survey of consumers indicates that they choose an insurer based on reputation rather than on price. They are not convinced by Internet-based insurance offerings, and much prefer telephone-based or broker-mediated insurance. The place of the branch is still assured, from the customer point of view.

The key to the development of the market in the period to 2006 will be the success of digital TV in reaching the mass audience the direct insurers need to tap in a way the Internet, or even WAP (wireless application protocol) telephones have so far failed to do.