Thousands of households have been receiving unsolicited personalised mail in recent weeks from the direct marketing department of AIG (Ireland) Europe Ltd, which is a promotion from its tied agent Family Insurances Advisory Services Ltd.

The style of the promotion is unusual in the Irish insurance market, but this particular promotion has been running since September 1998.

When you see an envelope with £250,000 Cash-In-AFlash Give-away written on the back of it and Guaranteed Cash Claim Ticket Enclosed, you don't expect it to be a sales promotion for an insurance product.

The insurance division of the Department of Enterprise, Trade and Employment is understood to be unhappy with aspects of the company's promotion.

It has a brief in relation to the selling of insurance and engages in regular consultation with insurance companies and their representative bodies. A Department spokesman said it was aware of the situation and in this context would be in contact with AIG.

When contacted, AIG Europe (Ireland), which is underwriting Family Insurances Advisory Services, the tied agent behind the promotion, said that the promotion was a tried and trusted product, which was fully compliant with legislation.

The managing director of AIG Europe (Ireland) Mr Sean Hehir said: "this same concept goes right around the world and if there was a problem with it we wouldn't be doing it."

He pointed out that AIG complies with all the relevant legislation and this was confirmed by the Department of Enterprise, Trade and Employment. The first page of the promotion material from the company says: "STUNNING NEWS, MS B! YOU'VE WON A CASH AWARD . . . COULD BE £25,000.00" The letter goes on to explain: "you can't collect unless you return your completed Entry Form and Claim Ticket."

Inspection of the list of awards and bonuses reveals that there are 24 prizes ranging from £500 to £25,000 and there are 105,000 prizes of £2. Essentially, anyone who returns the completed entry form is guaranteed to win at least £2. So where does the insurance come in? Well, to avail of the cash award, you have to complete and return the entry form. The entry form is an application form for an accident cash plan costing from £3.95 to £6.95 per month. It includes authorisation for monthly credit card payments or instructions to a bank or building society to set up a direct debit to AIG Europe (Ireland). There's even a diagram of a cheque, showing where the relevant information for direct debiting instructions is found.

As part of the promotion Family Insurances Advisory Services offers several weeks' free cover on its FourWay Accident Cash Plan up to a specified date, after which the direct debit or credit card monthly payment will be activated, unless the customer cancels the payment instruction. The company explains on another page that "if you are not convinced you need the FIAS FourWay Accident Cash Plan protection . . . you will be under no obligation to continue your policy or pay any premiums". This is a very elaborate way of generating new business and there is a concern in the insurance industry that this method is not necessarily the best way to do it. Mr Michael Kemp, chief executive of the Irish Insurance Federation, of which AIG is a member, said although he hadn't seen this type of direct marketing with a cash give-away used to sell insurance products before, there was nothing untoward about it.

"It is a question of reading all the material, as is the case with any financial product, regardless of the marketing method," he said.

As Family Insurances Advisory Services is a tied agent of AIG Europe (Ireland), AIG is entirely responsible for compliance with the Insurance Act. Non-tied agents and brokers are regulated by the Insurance Intermediaries Compliance Bureau . Mr Paul Gallagher of the Bureau had no comment to make on the company's marketing practice.

The average person in the Republic receives 26 pieces of addressed direct mail per year and a large proportion of that mail comes from companies or institutions that already have a relationship with the individual.

Mr Ed McCumiskey of the Advertising Standards Authority said that the volume of direct mailing is relatively low in this country and that people are not used to it. The ASA has not received any complaints in relation to the Family Insurances Advisory Services promotion so far, but according to their code, sales promotions should avoid causing unnecessary disappointment.