Norwich Union (NU) will have cut its 55 post-merger locations across the UK to 21 by the end of 2003.

NU claims director Simon Machell said that the insurer had brought its locations down to 34 by the beginning of this year and had set about 21 as its end target.

The closures will need 700 job cuts, with at least 400 of those employees being redeployed within NU.

A number of small offices have already been merged or closed and the offices in the second wave of closures will shut at the end of this month.

Machell said the cuts would improve the way NU handled claims.

But internally he says he expected NU's customer service levels to fall further, after admitting that many of its customers are already unhappy.

Machell warned staff in an internal message last month: "Given the amount of work being transferred around the country, the additional training requirements and the closure of a number of locations in the next few weeks, some impact on customer service is inevitable."

Publically, he admitted that the office closures will upset some brokers, but said it was not feasible to have a dedicated claims handler for every broker.

"The service we offer isn't up to the standard we wanted it to be after the merger, but I see it as my job to make brokers' lives as easy as possible within the commercial restraints in which I must operate," he said.

"I've got to achieve a balancing act of doing my job in the most cost-effective way possible, while still providing a good service."

Machell pointed out that NU's newly established Claims Academy would result in highly trained claims staff.

He said, given NU's sheer scale, it was likely to attract a greater proportion of complaints than other insurers.

"The complaints levels, which are three or four for every 1,000 claims, are very small," he said.

"We deal with 8,000 claims a day and get 700 or 800 complaints a month."

He said service was one of the company's major priorities and urged hard-pressed staff to cope.

But in the internal memo, he told staff: "Although we have made positive progress towards improving service levels, there's still a large number of customers who remain dissatisfied.

"The main reason for this is our failure to return phone calls when we promise to do so."

Morale took another knock recently when managers decided to outsource first notification motor claims to the RAC from Norwich Union Direct. The change will be introduced next month.

An NU spokeswoman said 80% of customers were satisfied with the company.