Is there more bad news to come? was the question in this column last week. Well there was, and in spades. We couldn't understand why an apparently solvent company with an apparently good book of business did not have suitors. What it did have, as is now clear, is a black hole of unquantified liabilities, and shares which are now thought to be worthless.

How could all this happen? As late as March 30, UBS Warburg advised investors to hold Independent shares. Three days earlier, ING Barings advised investors to buy.

No one comes out of this well – not the analysts, not the actuaries, not the auditors, not the directors, not the industry itself, not the regulators, and not, let it be said, the financial press. “Independent is a phenomenal growth story and shows how insurers should be able to make money by sensibly selecting risks” is a typical newspaper comment from 1997. Michael Bright's optimism “is fully justified” said the Financial Times as late as August last year. The few negative comments, and the rumours of under-reserving, have been kept in check by UK libel laws.

Insurance Times today launches a campaign to reform the way the industry is regulated. That includes identifying practices which should ring alarm bells for auditors and regulators, for example reserving a high proportion of claims at nominal amounts. It also means auditors checking loss adjustors' reports against the reserves for claims and challenging claims departments' reserving policies.

Above all, it means understanding the norm levels for premiums and profits, and being very wary – to the point of regulatory investigation – of any company that makes record profits on the back of low premiums. If results are too good to be true, they're probably not true. That's a lesson we all need to learn, unless we want to see another shooting star fall to earth.