'Insurance jobs switch to India'

THE insurance industry will be forced to cut thousands of British jobs - including senior management positions - and move them to India because its costs are still far too high, a City report warns today.

The report, from US investment bank JP Morgan, says bloated insurers will be unable to cope with the new era of 1% charges on savings products proposed by last year's review of the savings industry by Ron Sandler.

Its author, analyst Gordon Aitken, has calculated that the sector's cost base averages at 1.73% of assets, leaving it hopelessly uneconomic when 'charges will be driven towards 1%'.

It warns that the industry is also being hurt by consumer disenchantment with traditional 'with-profits' products where the provider can boost its profits by cutting bonuses.

By contrast, insurers can only increase the profit on the simpler savings products that are replacing them, such as unit trusts or ISAs, by cutting costs.

The report predicts that moves to outsource operations to India and other developing countries will accelerate and if successful 'Indian staff may be used to fill more senior positions'.

However, it says these moves are unlikely to be trumpeted as previous outsourcing deals have been because of the risk of stirring up opposition from unions and politicians.

Several British insurers have already made their first moves towards outsourcing to the subcontinent, where average monthly earnings are $140 (£90), only 5% of the $2845 average in Britain.

In May, Prudential unveiled a new call centre in Mumbai where it will shift up to 1,000 of its 3,000 UK-based customer service jobs. Norwich Union group Aviva is setting up a call centre in India for claim processing in December, creating up to 1,000 jobs.

US software giant Oracle plans to nearly double its workforce in India over the next year to 6000 as it scales up operations.