This was to be a recovery year for the industry. But instead 1,570 jobs are being cut.

It was supposed to be the year in which insurance recovered from the worst losses in its history.

But much of the news in recent weeks has been bad and there could be worse to come.

In a little over a month, the UK industry has announced plans to axe more than 1,500 jobs.

Despite their protestations otherwise, it looks like bad news for brokers who report worsening levels of customer service.

As each insurer makes cuts, it increases the pressure on their competitors to follow suit. And the pressure in the finance directors' offices has never been more intense than now, as the slumping stock market sends investment income into decline.

Allianz could be the next to make cuts after competitors cut loose hundreds of staff and millions of pounds in costs. Company sources indicate it is already working on a savings blueprint.

Zurich is also looking closely at costs.

AXA led the way by closing five UK centres and cutting 700 jobs to save 20% of its costs.

Groupama followed within days, announcing plans to shut regional centres at the cost of 120 to 130 jobs.

Norwich Union's (NU) announcement that it was embarking on a restructuring of its claims handling division came with 750 job cuts, although it says it will create 425 new posts.

The strategy comes with a one-off price tag of £11m for the closure of 11 claims offices, but is expected to go on to save £12.7m per year.

But what effect does the trend towards cost cutting have on customer service?

Paul Meehan, managing director of Harrogate-based broker Smart and Cook said: "It's just a continuation of the worsening levels of service. The fewer people they have, the worse the service gets.

"The theory goes that in the medium-to long-term, they will become more mechanised and technology will make the service much slicker, to the extent that you don't need face to face contact. But I don't really buy that."

Meehan said the effect of pressure on the insurers is another pressure on brokers - to maintain the service they give to their clients.

Alec Finch, director of the Manchester broker bearing his name, said: "Service is appalling and even the best service is appalling, but I don't blame the insurers. They are genuinely trying to get it right."

He describes as "superb" the service insurers give to their direct customers and said it is up to both brokers and insurers to improve standards in the broker channel.

In a poll on the Insurance Times website, a clear majority indicated they believed that NU's plans would lead to a decline in service standards - exactly the opposite of what the company wants.

One broker, who asked to remain anonymous, said: "We expect to see a worsening in their service, and they weren't exactly the best anyway."

Claims director Simon Machell sai8d the restructuring would improve customer service despite the overall reduction of 325 jobs.

Internal research found that smaller claims offices, typically with 40 or 50 staff, produced lower standards of customer service than larger centres."Larger centres are more effective," he said.

The costs are likely to show up in company accounts for the second and third quarters of this year. The savings are not expected to bring the restructuring programme back into the black until next year.

The jobs axe would not fall on staff answering phones to customers making their first call to tell NU about a claim, but on staff making calls to customers. Therefore customers should not face longer waiting times to speak to staff, Machell said.

Sources at NU indicate the company has seen a sharp increase in the number of executive complaints - the last stage of complaint before it goes to the insurance ombudsman.

Machell declines to comment on precise figures, but said: "The number of executive complaints has been largely static over the last year or so." The amount of outstanding complaint work had reduced.

Machell also hopes the decision would improve staff morale. Insurance Times has reported that senior managers acknowledge the company is suffering from low staff morale and are trying to tackle the problem.

Machell said: "We hope it will improve morale because it gives certainty to those sites which we are not withdrawing from.

"Clearly we regret the redundancies as far as individual people are concerned but we believe it will make us more effective as an organisation."

The restructuring process, which has about 18 months to run, will include investment in training and systems to boost specialist expertise. Machell does not foresee any further job cuts.

Where jobs will be cut
NU: Basildon, Bristol, Cheadle, Chelmsford, Edinburgh, Nottingham, Croydon, Leeds, Bishopbriggs, Northampton and Luton are all to lose Norwich Union (NU) claims offices

AXA: Bolton will lose the commercial service centre, Preston will lose an AXA branch office, Cardiff will lose AXA's claims handling operation, Plymouth will lose AXA branch office and Colchester will lose the call centre handling personal lines claims

Groupama: London, Leeds, Birmingham, Croydon, Newcastle, Glasgow, Bristol and Southampton will all lose Groupama's commercial lines business centres.

Total job losses. At Groupama it will be 120 (and maybe up to 130) + 750 from NU (also set to create 425 new posts) + 700 from AXA = 1,570 jobs cut.

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