Zurich Financial Services' decision to axe four offices, affecting 425 jobs, has been attacked by AiiB chairman Mike Slack.

Slack expressed dismay over the move: "Service standards are becoming non-existent with insurance companies. They should take a leaf out of the major supermarkets' book and realise the customer is king."

A Zurich spokeswoman said that brokers had been notified of the cuts and the company was unaware of any opposition

The brunt of the cuts fall on the insurer's 280-broker account staff in Liverpool and Reading who handle personal lines business for intermediaries.

The offices will close by the end of March 2001, with work transferred to offices in Cardiff and Portsmouth.

In a separate move, the Anglo-Swiss insurer also signalled its intention to cease writing motor trade business at its Newcastle office, from February 1 this year.

Neil Clutterbuck, head of commercial and motor trading at CGU, said Zurich's withdrawal would have a destabilising effect on the market, as it is the second largest insurer. But he stressed this was "indicative of the underwriting difficulties it faced".

He said pricing in the market had been hit by overcapacity and has not responded to rising claims inflation. He forecast premium rises of at least 25%.

Zurich has made an underwriting loss for the past few years and it believes pricing levels are still below that required to achieve profitability.

The run-off, mostly involving franchise dealerships and bodyshops, is to be transferred to Leeds by April 1, 2000. Fifteen motor engineering staff are also being lost.

The insurer is moving its home and overseas travel insurance operation out of its high-cost central London location by the end of June 2000.

Zurich said some redundancies are "inevitable" affecting up to 425 of its 7,000 staff, although new posts may be created. The insurer said the cutbacks are necessary to eliminate overlaps and cost pressures in the business acquired following its takeover of Eagle Star in 1998.

However, Zurich rejected concerns that job cuts will hit service standards.

Patrick O'Sullivan, chief executive of Zurich UK general insurance, said: "Our projected 1999 result is poised to demonstrate remarkable underlying improvement.

"But we know the reality of ever-changing market conditions means that we must continue to drive costs down, while at the same time deliver even higher levels of service."

Alan Wood, general secretary of the largest union at Zurich, the Manufacturing, Science and Finance union, said the cuts are informed by a cost-cutting culture which has prevailed at Zurich since the takeover.

"Zurich has become more profit-centred and consequently morale has suffered. People are reeling from the constant reorganisation."

He suggested the insurer is preparing a rapid expansion of its direct selling arm Eagle Star Direct, based at Newcastle and near Portsmouth, as a more profitable alternative to its indirect operations.

Market speculation has increased in recent weeks that Zurich is planning a merger bid with Royal & SunAlliance.