The UK insurance industry has found itself in a situation where it has had to make almost 3,000 job cuts in the face of the ever-worsening credit crunch. Although the banks and most other financial services seemed to be taking the brunt of job losses, the insurance industry is now seeing its fair share of restructuring. In the current climate, businesses simply cannot afford to be throwing away money and with this in mind insurers have no other choice than to let their workers go.

Insurers such as Norwich Union and Zurich are among those that are being forced to axe their workforces by up to 1,800 by 2010. Within the tricky economic climate, industry analysts and professionals are blaming inefficiencies in the structure of the businesses, which have evolved throughout history as being a root cause for the problems that are upon us currently. The economic base determines the flow of business and any successes or failures that occur within each company or organisation. It is clear that individual insurers cannot affect the flow of the market cycle, so therefore if they intend to maintain profitability, then they first need to assess their cost base. Zurich’s solution to this issue was to slash 10% of its cost base thereby building the foundation to have in place a sustainable platform to encourage growth.

Accountancy firm KPMG, predicted that the UK market would be hit by many more business restructurings as 2008 draws on. Insurers are advised that they need to take steps towards streamlining their businesses and in addition, that they need to instil more capital efficient arrangements and considerably more manageable group structures if they intend to see benefits and positive results.

John Kitson, the sales and marketing director for Norwich Union, acknowledged that the percentage of job losses that are being suffered is a secondary consequence of the recession, behind plans to restructure the company’s operations function, as well as simplifying processes and making significant improvements to customer services. He stated that, in order to remain on top in terms of the competitiveness of the insurance market, what are called for are changes that will literally transform the insurance industry.

Job losses are the unfortunate inevitability when global economies are plagued by recession; the risk and unpredictability involved when tackling the credit crunch and economic slowdown leads to businesses having to act on instinct and aim to make their workforce more efficient so as to survive the recession in tact and remain healthy. The possibility of even shutting down some offices as a strategy for streamlining and reorganising is another potential by-product of a weakening and troublesome economy. Some insurers view the job cuts in a positive light, seeing it as an opportunity to differentiate themselves from other service providers. It is impossible to avoid affecting services at a time when so much uncertainty is abounded and changes are a necessity.