Problems with brokers can only harden FSA attitudes, says Andy Cook

The supply chain has come under great strain during the liability crisis. So it comes as no suprise that the chain appears to have been stretched well beyond normal limits over recent months. And now the police are now taking an interest.

South Yorkshire police are investigating the supply and purchase of liability cover through a chain of brokers including Preston Whiteside. It is too early to say what the causes of this problem are, but the regulator will be watching very closely.

The FSA, which is currently consulting with the industry on regulations for the sale of general insurance products, has taken notice of the collapse of Ward Evans and the bad taste it left in the mouth of some policyholders and insurers.

This new investigation will add weight to the FSA's conviction that general insurance brokers require regulating with, perhaps, a heavier touch than previously thought.

The regulator is a fan of transparency and the industry did a great job in protecting its right to not disclose commission. All that good work could be undone. The FSA will look at the supply chains especially those that involve large numbers of intermediaries.

There are two possibilities open. One is caveat emptor: however, this will involve greater degrees of transparency, so that the policyholder can see how many companies are in the chain and what their roles are. The other option is for a firm in the chain to take responsibility, like Tesco does for its suppliers.

Whatever the result, the claims of brokers that the problems in our community are nothing like as severe as those in other areas of intermediation are begining to sound a little hollow.