The insurance industry is underestimating the amount of unauthorised underwriting taking place in the UK, law firm Pinsents said this week.
Pinsents partner Martin Membery cited the example of Tribune Insurance as one high-profile case of an insurance company operating without "appropriate regulatory authority".
The insurer issued more than 40,000 unauthorised household policies before being put into liquidation.
But Membery added that, though the case of Tribune had entered the public domain, there were many other insurance companies operating illegitimately.
He said: "My sense is that there are perhaps rather more of these instances of unauthorised underwriting than is generally appreciated.
"The legitimate UK insurance industry is facing unfair competition from those operating within the UK market without the appropriate regulatory authority."
Membery added that FSA regulation of the insurance industry would uncover more instances of unauthorised writing.
"The forthcoming statutory regulation of intermediaries is likely to highlight more instances of illegal operations and will, hopefully, also serve as a major disincentive to others looking to exploit the UK market in this way," he said.