Broker leaders have called for CGU and Norwich Union to bear the full integration costs of their proposed £18 billion merger which was announced on Monday.

Disruption to business and poor service standards following recent mergers, including CGU two years ago, have been severely criticised by brokers.

The merger is likely to be completed in 18 months.

Biba chairman Simon Bolam warned both insurers to avoid the pitfalls of past mergers, which, he said, have brought benefits to shareholders at the expense of brokers.

The City is undecided whether there may be rival bids from European giants such as Allianz and Generali, as the insurers' share prices have tumbled since the news.

Bernard Murphy, Biba spokesman for Anglia, fears the merger is shareholder-driven. He said brokers had yet to see any real benefits from CGU's previous merger in 1998.

"Morale in both insurers must have suffered. Staff at CGU have just come through one merger and must be thinking 'Oh not again'."

Biba will discuss the merger's impact at its quarterly meeting on March 1, where Bolam intends to tell Norwich Union and CGU managers that policyholders and brokers should not be hit with "a whole lot of disruption and added costs".

And he has other concerns specific to Scotland, namely that the new group should maintain CGU's offices at Perth and the CGU product brand.

He said: "Any reduction in Perth will be viewed with great sadness by the Scottish insurance community. And to see the CGU brand disappear will be disappointing."

However, part of the merger plan is to convert CGU policies over to Norwich Union, which has the stronger brand in the UK.

IIB director-general Andrew Paddick welcomed the creation of a British giant able to compete with massive insurers in Europe.

Patrick Snowball, head of general insurance for CGNU, which will have a general insurance premium income of £8 billion, said that it had given a commitment to the intermediary market to maintain its broker network and service standards.

He admitted that some insurers have allowed service standards to drop: "We recognise that last year service did slip across a number of insurance companies."

But he stressed that this was not completely the fault of mergers, but also the hardening motor and commercial markets which have generated increased enquiries.

He added: "We are extremely aware of the scrutiny around the issue of service standards and we will do everything we can to alleviate this."

But he took issue with the progress the broking sector is making in investing in e-commerce.

"The broking community must work with us in the changing insurance market by examining the way they do business and by investing in new technology."

He also wanted to know why more brokers were not out-sourcing their back office functions to software houses. "My concern is that 30% of UK brokers' offices are not connected to the web," he said.

Cees Schrauwers, former head of CGU Insurance, is now CGNU's head of international general insurance, which does not include Europe.