Prudential is aiming to save £60m over the next two years through a £722m outsourcing contract with Capita which will see 3000 employees transfer to the outsourcer.
The insurance company is transferring the administration of its current and new policies in a 15 year deal, which is a key part of the company's plan to save £195m per year by the end of 2010.
The company hopes to cut the cost of each policy by 32% by 2011.
About 1,750 UK employees and 1,250 Mumbai-based employees will transfer to Capita.
"The agreement with Capita is another significant milestone in our programme to deliver continued superior performance and profitability in our UK business. We have set out very clear priorities for the business and this agreement helps us to deliver our strategy by removing fixed costs from our operations and achieving significant operating efficiencies," said Nick Prettejohn, chief executive of Prudential UK.
The agreement provides for Capita to acquire business and assets from Prudential, for a consideration of £25m, including part of the business of PPMS, Prudential's offshore operation based in Mumbai.
At its 2007 Interim Results, Prudential confirmed that actions were in place to deliver £115m of the £195m savings by the end of 2007. The agreement with Capita will lead to savings of £60m per annum by the end of 2010.