Mergers and acquisitions happen relentlessly in the insurance industry – as in the business world generally – and will continue to happen. But no one pretends they are easy.

Bosses of merged companies have to swiftly get down to the job of combining two corporate cultures. This difficult and lengthy task involves bringing together computer and payroll systems, office functions, and offices which may, by geography alone, be hundreds of miles apart.

Obviously, the greatest effect will be on staff. Will there be redundancies? If so, how many? Probably one person will now do a job formerly carried out by two, but which one? And how can you be sure you keep the right person at a time when many in the industry claim there is a skills shortage?

Then there are the corporate battlegrounds known as "conflict zones."

Harriet Eisner, of finance services trade union MSF, which represents many in insurance, reckons around 130,000 jobs have disappeared from the industry over the last ten years.

Her union accepts that there will inevitably be job losses after a merger, but is concerned about a lack of consultation that could increase redundancies. This area is a bit of an industrial relations minefield.

MSF believes staff representatives should be consulted before redundancies are announced. For example, in the 1996 merger of Royal Insurance with Sun Alliance, the news of 5,000 job losses came simultaneously with the merger announcement.

But the companies, of course, stress that the extreme market sensitivity of a large merger makes that impossible.

Indeed, an industrial tribunal involving United Assurance (the union of United Friendly and Refuge) ruled last year that consultation need only begin when the exact casualties have been identified – not when there has been a general decision to dismiss.

Naturally, this has an effect on staff morale. MSF says: "We're not anti-merger per se. Rather we want to see an amelioration in the way management treats their workforce before, during and after. The legislation needs strengthening."

Eisner wants to see companies encourage "employability." She says: "Many staff are being bled from the industry and don't get re-employed. Companies should be offering skills that are translatable."

This means ensuring that staff can do a range of jobs in the industry so that in a redundancy situation, there is somewhere else for them to go.

Another problem is that it is often the wrong people who are made redundant – exacerbating the skills shortage which already exists.

Freddy Hospedales of the Chartered Insurance Institute says: "The difficulty with a merger is that you end up keeping the young ones and getting rid of the experienced middle-management.

"This creates a skills gap all the way up to the top, between the new and the top management."

But when staff go, where do they go? "Most of those who leave get a decent package from their employer so some take early retirement," says Peter Farmer, director of recruitment consultants Searchlight Solutions.

"But a lot go into consultancy and back into the industry on a short-term contract basis. A lot of companies are outsourcing business these days."

It's not just departing staff who need worry, though. A merger very often creates a clash of cultures that can take months (or years) to resolve.

Hospedales says: "I know of one northern insurance company that merged with a southern one and adopted a name combining both. Yet the northern and southern companies continued to use their old separate names."

Such conflict zones can reach into areas that on the surface seem petty, but that matter greatly to staff.

Ross Hall, of consultancy Garol, recently wrote: "While a rational outsider may view the question of whether staff do or do not pay for coffee as a trivial non-issue, for the people involved, it is another demonstration of their culture coming under threat."

Despite all these difficulties, merged companies do generally reach some corporate harmony. It may be hard work and take a long time, but between staff, management and unions, a merged company will usually, over time, become more than the sum of its parts – in terms of both profitability and shareholder value.