Post Office drive for car insurance market

(Getty Images/iStockphoto)

The Post Office this week made its second foray into the financial services market, with the launch of a new car insurance product, which it claims will undercut its high street rivals by an average of £120 a year.

The move comes just four months after the launch of a new financial services joint venture with the Bank of Ireland, through which it plans to launch a range of insurance, lending and savings products over the next few years. Its first move was to launch into the competitive personal loans market in March.

The Post Office says that its new car insurance product will remain one of the most competitive by using a panel of over 20 insurers. It also says it is committed to not cherry-picking customers, but will instead endeavour to offer quotes to 99 per cent of the market.

David Mills, the chief executive of the Post Office, said: "Many consumers are not aware of the cherry-picking undertaken by insurance companies to provide the cheapest rates possible. Our new car insurance offering promises to quote for 99 per cent of consumers, reflecting the Post Office objective to provide simple, value-for-money products, which are accessible to everyone."

The Post Office's launch comes after a two-month trial in the Midlands, which it said "exceeded" its expectations. The group believes it is perfectly placed to infiltrate the market, already dealing with the drivers of some 27 million cars, which are taxed through Post Office branches every year. Driving licences too are processed through the Post Office's counters.

The group says it aims to steal a 5 per cent share of the market within just three years, and through the launch of other products hopes to quickly grow to become one of the major forces in the UK financial services industry.

A spokesman for Direct Line, one of the largest direct financial services companies in the UK, said: "Increased competition is good news for consumers. However, the offer isn't really very clear. The Post Office is claiming to be cheaper in three out of four cases. Cheaper than what? The Post Office may be cheapest in the one scenario, however that is only one risk. At the end of the day we always recommend that customers shop around as insurers all price differently for different risks. If they do, I think that motorists will find that Direct Line offers one of the best value for money policies."