IN THE 1990s, states such as Wisconsin experimented with welfare reform, driving a national change in policy. In the current decade something similar is happening with financial regulation. Although Enron Corp.'s collapse and succeeding scandals drove Congress to pass significant legislation, the performance of New York State Attorney General Eliot Spitzer has been at least as remarkable. Lawsuits brought by Mr. Spitzer have revealed conflicts of interest at the investment banks that sell equities as well as massive cheating by mutual fund companies. Now Mr. Spitzer is going after conflicts of interest in the insurance industry.

The attorney general's latest target is Marsh & McLennan Cos., the leading broker of insurance. Marsh's role is ostensibly to serve businesses by soliciting bids for their insurance needs from rival insurers. The businesses pay Marsh for this service, figuring that the fee will be more than justified by the lower insurance premiums that result from competitive bidding. However, there's a catch. Marsh accepts fees not only from insurance buyers, it accepts them from insurance sellers. As a result, the buyers are sometimes getting nothing for their fees, because Marsh is putting their interests behind those of insurers.

Mr. Spitzer's latest lawsuit alleges one disturbing instance. Fortune Brands Inc., an Illinois company that sells products from Jim Beam spirits to Titleist golf balls, paid Marsh to find a good insurance deal in 2002. Marsh apparently decided to push the business toward American International Group Inc., a large insurer better known as AIG. When another insurer, ACE Ltd. offered to cover Fortune's risk at a lower cost, Marsh persuaded ACE to raise its price, thereby allowing AIG to win the contract. Marsh, in other words, appears to have been doing the opposite of what Fortune Brands had paid it for. Instead of driving premiums down, it was deliberately driving them upward.

The Fortune Brands example has yet to withstand scrutiny in a court, and one scandal is a narrow basis for attacking a whole industry. But Mr. Spitzer says that Marsh & McLennan received $800 million worth of payments from insurers in 2003. The firm acknowledged the potential conflict of interest by announcing it would stop accepting such commissions. Marsh serves large and small businesses all over the country, so the potential for abuse is wide, and Mr. Spitzer's inquiry will take in other big insurance brokers. Like the investigations of equity sales practices and mutual funds, Mr. Spitzer's latest offensive may run for quite some time. Celebrating his latest coup at a press conference last week, the attorney general sounded like the fox who regrets that chickens don't run faster: "This investigation is broad and deep, and it is disappointing."