Virgin's new drive

VIRGIN Money has unveiled plans to gatecrash the general insurance market. Chairman Sir Richard Branson says premiums on some home, car, travel and pet policies have soared unfairly since the 9/11 attacks on the US.

A key pledge is to not penalise customers who pay monthly and to offer a 10% discount to those taking more than one type of insurance.

'There is nothing we love more at Virgin than improving the customer‘s lot and at the same time challenging existing providers,' Branson said.

'Interest charges on insurance premiums paid by direct debit are costing consumers dear. We won't be charging a penny more for customers that enjoy the convenience of paying monthly.'

It estimates that customers should be able to save up to 48% on car insurance and 40% on home insurance through the group, due to its 'aggressive pricing'.

Around 60% of consumers pay for their insurance cover on a monthly basis, but many firms charge them interest for not paying the full amount up front.

Virgin Money, which already has a million borrowers and savers, says premiums for a 25-year-old man driving a Fiat Punto in Essex would be around £318.19, while a 35-year-old man driving a BMW Mini One in Kent would pay £231.

But a quick search on This Is Money's insurance finder suggests Virgin might not necessarily be the cheapest. A 54-year-old woman driving a VW Polo in Cardiff would pay £193 with Virgin. The cheapest quotes on our insurance finder, assuming she is an office manager living in Cardiff city centre, was £174 with Swinton, based on a £100 excess compared to Virgin's £250 excess. Both are based on maximum no-claims.

Rivals dismissed the threat from Virgin. Tesco Personal Finance, which has a million insurance customers after launching its service four years ago. 'New entrants such as supermarket banks are already shaking up the traditional insurance market, driving down costs and encouraging people to shop around,' said Allan Burns, head of insurance.

Virgin earned a reputation for shaking up financial services when it launched a lower cost index-tracking fund, vastly undercutting the industry, in the mid-Nineties. However, the fund, which charges 1% a year, is now one of the most expensive tracker funds on the market.

Last month the Virgin Group took full control of Virgin Money after financial services group HHG sold its 50% stake for £90m. It has also announced that Virgin Money made its first post-tax profit of £1.8m in 2003.

The company, launched in 1995, has expanded aggressively in Australia where it has attracted 300,000 credit card customers in 12 months.