Co-Operative Insurance has entered into a 10 year business process outsourcing contract with preferred bidder Capita, in order to save costs and improve customer service.

Under the deal, worth £270m, Capita will handle customer care and deal with claims. The outsourcer will take on 800 Co-operative staff next month when the project begins, and the employment will remain in Manchester, the city where the staff are already working.

Capita will provide customer services, policy administration, new business and claims activities and the associated technology for nearly 5 million policies across Co-Operative Insurance’s life and pensions and unit trust operations.

The firm will also design a platform to enhance Co-Operative Insurance’s new product development.

David Anderson, chief executive at Co-operative Financial Services, said that extensive changes across Co-operative Insurance were starting to pay off: “Over the last three years, the change programme undertaken within Co-operative Insurance has delivered significant customer and business benefits ahead of schedule.”

In April, the company extended its 12 year outsourcing contract with Xansa in a deal expected to be worth up to £100m over five years.

In July, the insurance division’s parent, Co-operative Financial Services (CFS),announced plans to cut 1,000 back office staff, and it was thought IT workers would be included in that figure.