Brokers have condemned Norwich Union (NU) for cancelling the agencies of companies placing small amounts of business with the insurer.
It said it was "only able to support and develop those insurance intermediaries who are able to deliver significant volumes of business" due to the changing insurance market.
The company denied it was seeking to take business out of the intermediary channel, and said brokers were being given the option of placing their business with NU via an intermediary with a larger agency.
NU is currently writing to approximately 6,000 companies with personal and commercial lines agencies worth less than £40,000 in annual gross written premium cancelling their agencies. It is halfway through the process.
Brokers that have agencies cancelled are given the option of placing business through a number of nominated local brokers who have larger agencies with NU, or they can choose to place business with an NU agency broker of their choice.
But if no action is taken the insurer will contact policyholders directly.
In a letter sent to brokers, NU said: "We would like to continue to offer insurance to your private car, household, motorcycle and van customers who currently hold policies with us.
"We will therefore transfer all qualifying policyholders to our Home & Drivers Club facility."
The letter then goes on to say that other policyholders will be written to directly to ask them to transfer their business to another intermediary in their area.
NU said the business was not being transferred to the direct channel. A spokesman said: "If the business can be transferred to other intermediaries then we are more than happy with this."
He said the vast majority of brokers had accepted that the insurer had to cut its agencies, and were accepting the option of retaining some premium income by placing their business through another intermediary.
The insurer said it was willing to discuss its decision with brokers and that if they could present a good business case for continuing the agency, it would be happy to do so.
But one broker whose agency was cancelled said he was "disgusted" with the way the insurer was treating its small agents.
He said he wanted to expand his agency agreement but that NU was "simply not interested".
Industry sources have said that Norwich Union is not the only insurer considering an agency cull.
