The Co-operative Insurance Society, one of Britain's leading proponents of ethical behaviour in business, is to cut 2,500 jobs to reduce costs and increase its competitiveness in the financial services sector.
CIS said it had not ruled out compulsory redundancies in its drive to reduce the headcount from 9,000 to 6,500 within the next two years.
The society, part of the Co-operative group whose philosophy is based on returning profits to customers, said it was being forced to make cuts because of the increasingly competitive nature of the market.
Mervyn Pedelty, chief executive of the Co-operative Financial Services Group, which CIS is part of, said: "CIS is not immune to the intensifying economic and competitive pressures occurring within its core markets and we need to take action now to ensure a vibrant, successful, and sustainable future for our business."
The job losses will be part of a plan to re-organise CIS. It plans to boost its telephone and internet routes to customers. It will also look at imminent changes in financial regulations to see whether it might be able to offer other companies' products through its own channels.
The restructuring would not, the group emphasised, result in the scrapping CIS's direct salesforce of about 3,000 people who visit customers in their homes. CIS now has the largest direct salesforce in the UK, after a number of other financial services companies such as Prudential have decided the scrap the practice. CIS defended keeping the salesforce, saying it was an important way to contact customers.
Unions presenting employees of CIS expressed "deep regret" that it was pruning its headcount so dramatically.
David Fleming, financial officer for Amicus, said: "While we accept that CIS has to change and modernise, we will vigorously oppose compulsory redundancies."
Dave McCall, regional secretary for the Transport and General Workers Union in the North-west, said: "The job losses are a hard blow. They appear to be the price to pay for bringing CIS up to date to meet the challenges of tomorrow."
CIS, which specialises in ethical investment, merged with the Co-operative Bank, which owns the Smile internet bank, in April 2002 to form Co-operative Financial Services. The group has seven million customers and 14,000 staff. Its assets under management, in December last year, were £31bn.
"CIS has a strong reputation with its large and loyal customer base. By taking this action we will be better placed to go forward to fulfill our Co-operative mandate of meeting the needs of millions of ordinary UK households," Mr Pedelty said.