Some 600 jobs will be lost in the insurance industry over the next three years as Insurance Australia Group (IAG) revealed on Friday plans to reduce its workforce to counter the high costs that hit the firm last year.

Set to be affected by the adjustments were hundreds of workers from IAG subsidiary CGU.

According to CGU Chief Executive Peter Harmer, the changes, which he described as 'logical progression', is necessary for the firm to effectively upgrade its business performance and remain competitive in the field.

Mr Harmer blamed the avalanche of claims that industry had encountered in 2011 due to the slew of natural disasters that struck Australian regions last year - from bushfires, floods though cyclones that led to huge economic costs fro many local industries.

In the aftermath of the devastations, the insurance sector emerged as the hardest hit as claims after claims were addressed by industry players.

According to The Herald Sun, the insurance industry paid a total of $4.4 billion that covered about 200,000 claims.

On its part, IAG said on January that it paid more than $100 million for reinsurance claims, further compelling the insurance group, which also includes the NRMA business operations, to implements cost-saving measures.

The move, according to IAG officials, will gradually result to savings of up to $65 million, pre-tax.

The changes, Mr Harmer said, will be mostly geared towards the elimination of duplicating roles in CGU, amounting to the retirement of 600 positions.

In the process, Mr Harmer added, CGU will also roll out a new business model that "simplifies our structure, making it easier for brokers and agents to deal with us and access the immense knowledge and expertise that sits within our organisation."

Hopefully, the strategy "will continue the improving trend in CGU's financial performance," the company said on its statement issued on Friday.

The transition to be implemented by the insurance giant will be carefully managed to cushion the impact on CGU employees that will be most affected, Mr Harmer said.

"We are very conscious of the impact that these changes will have on our employees and will be actively supporting them through this transition ... and where possible, we will be managing the reductions in roles through natural attrition," the CGU chief was reported by the Australian Associated Press (AAP) as saying.