Job cuts at NU and Zurich will be mirrored across other UK insurers, says KPMG.
The scale of the job cuts announced by Zurich and Norwich Union (NU) last week could be mirrored across the whole of the UK insurance industry, according to KPMG.
Tony Hulse, a partner and head of general insurance at the professional services firm, said: “[The staff cuts at] NU and Zurich have to be representative of the approach that will be adopted by other insurers. Staff costs make up 50% of operational costs.”
Last week NU and Zurich announced combined job cuts of up to 2,700 staff in the UK.
Zurich said between 700 and 900 jobs could be lost – up to a sixth of its workforce – as it looked to slash 10% off its cost base.
NU said as many as 1,800 jobs could go in a move to streamline the insurer, which employs 18,000 in the UK.
Hulse said the two insurance giants were responding to the pressures heaped upon them by the tough insurance market and worsening economic climate.
He said other insurers would also be looking to cut costs similar to NU and Zurich.
Others are more cautious in their predictions. Deloitte insurance partner Andrew Power said insurers that operated in the highly commoditised markets, such as private car, would be under the most pressure.
He said: “Increased commoditisation is making cost a key element.
“It is difficult to differentiate other than on price, so there is intensive focus on cost.”
Mark Winlow, a director of consultancy LECG, said insurers were also facing pressure from rising broker commissions.
Winlow argues that while other insurers will face pressure to cut costs, they will not be seeking to achieve the same reductions as NU and Zurich.