Tower Australia has joined with Virgin Money Australia to establish a new direct life insurance business.

Virgin will provide brand, product development, customer service and marketing expertise to the joint venture while Tower will be responsible for manufacturing products and providing ongoing policy management.

The first policies will be sold from next year. The deal is another step in Virgin’s plan to become a broader financial services company in Australia. The agreement is for an initial term of seven years with an option to extend it.

A Tower spokesman told insuranceNEWS.com.au the products will be aimed at a younger audience and are not seen as a threat to Tower’s adviser-driven business.

“It will open up new areas for us and we do not see this as a threat to our relationships with life advisers,” he said.

“We are hoping the new customers will eventually move to an advice model in the future.”

Virgin Money MD Matt Baxby says it will be launching a “great-value” product to increase competition in the life insurance market.

“I see a lot of opportunity for Virgin Money, given research shows 95% of families in Australia don’t have adequate insurance cover,” he said.

“Ensuring life insurance is accessible to more Australians will be at the core of our product offering.”

Tower MD Jim Minto says the agreement with Virgin is part of a strategy to improve accessibility of life insurance.

In an investor briefing last week, Mr Minto said the insurer sees its direct insurance model having simple “no advice” products sold through call centres.

Currently the company has $1 billion of inforce premiums from its direct life business, which grew by 26.6% last year.

Mr Minto says the total direct life insurance market currently has a 13.8% market share.