HSBC fired the latest shot in the current account war today with the launch of a free insurance policy that promises to refund customers who overpay for goods.

The "price promise" insurance policy, which is available to the bank's 7.6 million current account customers with debit cards, enables people to claim back the difference if they find an item they bought on the high street cheaper in another shop.

The insurance covers branded goods such as electrical appliances, DVDs, jewellery and trainers and will pay out for purchases made using either a credit or debit card.

However cover does not extend to antiques, plants and animals, perishable goods, travel or online purchases, or items which are in a sale.

There is also a 60-day time limit on making a claim, and the minimum amount that can be claimed is £10, while the maximum is £5,000 a year.

HSBC launched the insurance policy after research showed customers would value it above earning high interest on their current account balance.

The high-street bank also hopes the move will help it boost its existing 14% share of the current account market.

Commenting on the launch, Stuart Glendinning, of price comparison website moneysupermarket.com said: "It is both encouraging and illuminating that HSBC is improving its current account propositions.

"It reflects a market where the big banks cannot stand aloof to the increased competition from the likes of Halifax, Alliance & Leicester and Nationwide.

"The HSBC price promise is not new to the personal finance industry but this offer is eye-catching for its scope - making it available to all existing customers unlike most new current account propositions.

"In the past, banks have relied on inertia to retain customers and this is a further sign that competition is making the banks become more proactive in responding to market conditions."

HSBC has also launched relaunched its Premier account for high earners and introduced a new packaged deal, known as Bank Account Plus, aimed at people who travel abroad frequently.

The account, which costs £9.95 a month until January when the fee rises to £12.95, offers free worldwide family travel insurance, free worldwide cash machine use, commission-free currency and travellers cheques, and discounts of up to 50% on UK hotel bookings.

Mr Glendinning said customers tempted by the offers available on this account needed to consider whether they were really of value to them.