The supermarket chain will take on responsibility for the pricing, marketing and development of its motor and household insurance after forming a new partnership with Fortis.
Tesco said that as many as 1,500 jobs could be created due to growth in the operation, which is part of Tesco Personal Finance.
Insurance products are currently sold through Royal Bank of Scotland, but this has been under review after Tesco spent £950m on buying the bank out of a joint venture partnership last year.
Tesco generates about £500m a year in premiums from sales of car, van and household insurance.
Fortis, which will provide underwriting and claims management, has about 7m UK customers.
