The World Insurance Network (WIN), the most ambitious electronic network established yet, began testing last month and will be launched later this year. It could see insurance quickly turn into a truly global operation, with risks and underwriters instantly matched across the world. It is understood that in one of its first live operations an important energy renewal risk was underwritten entirely outside London, within 24 hours, by electronically requesting tenders. The process would normally take weeks to complete, at much higher overheads and premiums.
The project is a joint enterprise between the big six multinational insurance brokers, Alexander & Alexander, Aon, Johnson & Higgins, Marsh & McLennan, Sedgwick and Willis Corroon. It uses networking technology, backed by Concert, a joint venture between British Telecom and MCI of the US.
International brokers are frustrated by the ancient London traditions of contracts being "walked the streets", as brokers try to obtain underwriters' signatures for contracts, and by the massive overstaffing in back room operations.
Howard Green, head of technology at Marsh & McLennan, told a conference last month: "To say that broking is an inefficient business is to understate the point. This industry has been untouched by the 20th century. Cost has not changed one percentage point in the last 20 years."
WIN, said Mr Green, would "revolutionise insurance", allowing brokers to dispense with the vast majority of back office workers, bringing down costs, and improving efficiency.
The UK insurance industry employs around 300,000 people, half of them working for brokers and agents. With the industry still wedded to paper transactions, and visits to underwriters for contract signatures, it has avoided the job losses of trades such as banking, which has cut 85,000 jobs since 1990.
"WIN will cut back considerably on the number of staff employed, especially in the back offices and among placing brokers who are physically going out doing the business," said Joanna Francis, insurance analyst at stockbroker James Capel.
"If it works - and the indicators are that it will work - it means they are no longer tied to London as a lead market," added Julianne Jessup, analyst at rival broker UBS.
Electronic placing may also favour the bigger brokers, making it more difficult for the provincial outfits, operating at low profit levels, to survive.
The project marks the insurance equivalent of the 1986 "Big Bang" revolution on the London stock market and comes at a time of crisis, sources say, for the UK's attempts to place business electronically.
Industry sources expect Lloyd's of London market this week to scrap its own Electronic Placing and Support (EPS) system, which has been under development since 1990 but is far from user friendly. Lloyd's denies the talk but admits that the initiative has been passed back to the market.
A bulletin on progress will be issued this week, a spokesman said. Any bad news will invite unfavourable comparisons with the fiasco of the stock exchange's Taurus electronic share trading project, finally scrapped in 1993.
The revolution coincides with drastic change elsewhere in the industry, as direct insurers are forcing brokers and big insurers to change the way they operate. Another 50,000 jobs may go within the big insurance companies as they merge to fight competition, analysts believe.
The banking and insurance union, Bifu, is now seeking an emergency meeting with Michael Forsyth, Secretary of State for Scotland, to discuss redundancies from the Scottish-based life insurers.