Anthony Hilton says the big brokers are slowly waking up to the prospect of having to work for their money

There is nothing like the abrupt departure of a popular chief executive to set tongues wagging. When Bruce Carnegie-Brown was put into Marsh less than two years ago, he was hailed as the first of a new breed of insurance broking executive - someone who had cut his teeth elsewhere in the financial world who would come in without the baggage to drive through change.

When he left abruptly on the eve of the spring bank holiday and disappeared immediately to his cottage in Devon, the company said it was because he had other plans he wanted to pursue alongside his duties at Marsh.

Perhaps he did, but people do not normally leave immediately, clutching the metaphorical black binliner, when everything is wholly amicable. It immediately provoked speculation that Marsh was finding it much harder to rebuild its income in a post-Spitzer world than Carnegie-Brown had anticipated, when he decreed that the broker would no longer collect contingent commissions.

But whatever the reasons for going, these don't seem to be them. The firm is not making as much as it was, but it is heading the right way and doing a whole lot better than past year. Indeed, on current trends within about 18 months it probably will have made up all the lost ground.

But, more to the point, the sudden loss of income was the kind of shock the business needed to shake it out of its culture of complacency - not only at Marsh, but across the sector. While locked in the gilded cage everyone made so much money so easily they never quite got round to modernising their processes, refreshing their product offerings or making serious improvements and innovations in the levels of service to clients.

When income plunged, they saw for the first time in years that they might have to change.

There are still legacy issues, of course, some of which are unlikely to be settled without some blood being spilled. The claims handling and policy issuing work that brokers have provided as a service to the subscription market - the original reason for contingent commissions - are going to take some sorting out.

The money to pay for the work - the earlier commissions when the business was first placed - has long been spent or distributed as dividends. They don't have the money or the fat in the balance sheets to do the work without a fresh injection of cash.

Lloyd's insurers are being forced to the reluctant conclusion that either they pay the brokers again, in spite of having paid once, to get the work done, they take it back in house and do it themselves at their own expense, or create some common utility like Equitas to do it for all of them.

The big international brokers clearly feel the need to address their clunking processes, and demonstrate clearly to clients where they add value. Marsh is trying to do it. Max Taylor, of Aon, said something similar in a recent speech, and Joe Plumeri, of Willis, bangs on about little else. But the message seems not to have travelled very far north of Watford, or outside the Square Mile for that matter.

Not only do most brokers continue to take contingent commissions - as is well known - but they continue, as a consequence, still to be in denial about the need to change.

Take the issue of transparency under which the client gets full disclosure of all the fees and income the broker can expect from the client's business. Full disclosure is the norm in most other parts of the financial services industry. It is what the client wants. It is what the FSA is pressing for. But the industry seems blind to the signals. It focuses on the obvious short term disadvantages which will come from transparency.

One suspects however that the coming change will be much bigger than this. The insurance market is not so much one market as a collection of cottage industries, and the only people who see into them all, to see the price and size of all the products, are the big brokers.

It follows that they are in pole position to capture this information, to put it on screen and create a genuine electronic market which could be distributed direct to customers.

It would not do for all products but some 80% of business could be easily standardised, leaving 20% for special negotiation.

What is stopping it is the mentality inside the brokers, their silo structures where

people guard their contacts and own the client relationships. But that is now under pressure, and when it breaks, it opens the door for screen-based trading and the transformation of the industry. IT

Anthony Hilton is a columnist with the London Evening Standard