Eliot Spitzer's investigation is forcing changes in the industry

The firm plans to trim its workforce by 5% to offset the fall in revenues likely to result from the lawsuit.

New York Attorney General Eliot Spitzer has accused the firm of colluding with insurers to fix prices.

The lawsuit has triggered similar investigations across the US, involving some of the industry's biggest names.

Widening

Insurers Aon and Willis said on Tuesday that they had received several subpoenas, Reuters reported.

Aon, the world's second-biggest insurance broker, said that Connecticut's Attorney General Richard Blumenthal had sent the subpoenas.

Mr Blumenthal has launched his own investigation of the insurance industry.

Willis said it was cooperating with regulators and providing documents, but did not give any more information, according to Reuters.

There also were reports that Florida had begun its own probe into a number of firms.

Falling profit

Marsh has set aside a minimum $232m to cover any settlement stemming from the law suit.

The majority of the jobs will be lost at Marsh Inc, the company's risk and insurance services unit.

We recognise the seriousness of the problems we are facing Michael Cherkasky, Marsh & McLennan

At the same time as announcing the job cuts, Marsh reported a 94% fall in profits over its most recent trading period.

Income in the third quarter totalled $21m, compared to $357m for the same period last year.

Profits were hit by costs set aside for regulatory settlements and a decline in revenues from commission fees, known as market services agreements, which are at the centre of Mr Spitzer's investigation.

Marsh has pledged to scrap the fees from the start of 2005.

"We recognise the seriousness of the problems we are facing and are moving quickly to correct them," said chief executive Michael Cherkasky.

"Unfortunately, we must also adjust staff levels based on the realities of the marketplace and our current situation."

Management changes

Mr Cherkasky replaced Jeffrey Greenberg who resigned as Marsh's chief executive and chairman ten days after the company was named in the lawsuit.

A number of other senior Marsh executives have since been removed including Roger Egan, president and chief operating officer of Marsh Inc.

None have been accused of wrongdoing.

Marsh has pledged to reform key business practices in response to the lawsuit.

Fees which brokers receive for directing business to insurers will be scrapped from 1 January 2005.

These fees accounted for 7% of Marsh & McLennan's revenues last year.

Marsh has also said it will set up a compliance unit to oversee its broking activities and disclose all fees and commissions paid to clients.

Marsh's shares have lost 40% of their value since Mr Spitzer detailed his lawsuit on 14 October.