There is a growing belief that, besides picking up their own bills, the life insurers may have to bail out thousands of independent advisers who will be unable to meet compensation payments.
And the industry could face more woe from the Securities and Investments Board, which is rumoured to be close to unleashing another damning report about pension sales methods. Insurance companies have already been forced into retraining sales staff.
Yesterday's price falls in the sector, which had been a prime driving force behind the market's general advance in the last week, saw Prudential lose 11p to 307p, Lloyds Abbey Life drop to 310p and London and Manchester shed 5p to 335p.
Legal & General was additionally hit by yet another profit warning from the recently floated Aerostructures Hamble, in which it has a 19.05 per cent stake. Aerostructures, floated at 120p in June, crashed from 59p to 20p within minutes of the opening.
The Seaq trading system could not cope and prices in the company went indicative soon after the bell. Some large investors will confront Aerostructures' management and its advisers at a private meeting on Monday. The shares closed at 24p.
Its shock statement was swiftly followed by a profits warning from Senior Engineering, down 34p to 72p, and then another from the ranks of the Unlisted Securities Market by Holders Technology, down 24p to 95p.
They were shocks that the market could well have done without on a day overcast by a weakening dollar, which undermined leading international stocks.
The run of six consecutive trading sessions of surging share prices came to an abrupt halt. The FT-SE 100 index, which had gained almost 186 points over the past week, only just managed to stay the right side of 3,100. It slid 35.2 points to 3,106.7 and the FT-SE 250 lost 13.2 to 3,543.4.
There was no panic selling, although much of the day's volume of 575 million shares could be put down to investors taking profits on the market's recent strength.
Big fallers among the internationals as the dollar hovered about its year's low against the mark included ICI, off 18p to 792.5p.
Only 13 of the top 100 shares finished higher. They included Granada Group, up 6p to 520p.
Granada was helped by talk of a pending report from Lehman Brothers that BSkyB, contrary to popular opinion, would not suffer from the growth in the cable television industry. Granada is a big shareholder in BSkyB.
Eurotunnel units lost another 228p on further concern about its ability to meet its business targets. There were further teething problems yesterday - a breakdown during a trial run of a high-speed Eurostar train from Paris to London caused chaos to rail services in Kent.
Elsewhere, Proteus gained another 19p to 159p following the successful results from its equipment for testing for BSE, and Anagen, the health care group, rose 7p to 59p on talk of a buy recommendation note being published by one broking house ahead of interim figures next week.Reuse content