The UK’s insurance market could benefit from "simpler, more straightforward rules", according to new proposals published by the FCA today.
The regulator plans to strip "outdated or duplicated" requirements from its insurance rulebook, having asked what improvements it could make.
It says the changes could "support lower costs and wider access for the businesses and consumers who rely on insurance to manage risk, while maintaining appropriate levels of protection".
What measures is the FCA proposing?
The regulator is proposing to create a new definition to identify large commercial insurance customers who should not be captured by its conduct rules. It says this would ease the burden on firms insuring larger businesses that can manage risks independently, while protecting smaller commercial customers.
In addition, it is considering no longer requiring firms to review the value of their product at least every 12 months. Instead, firms would use the risks and characteristics of each product to decide how often they review them.
It also wants to give firms flexibility to appoint one lead insurer to comply with its rules in instances where more than one party is involved in designing the insurance product.
Under the plans, the FCA will broaden the scope of bespoke contract exclusions and make them easier for all insurers and brokers to use. Bespoke contracts are built to suit one customer upon that customer’s request, which means they automatically have the protections product governance rules provide.
The proposals would also remove duplicative annual reporting and employer’s liability notification requirements.
Finally, the FCA intends to remove the specified minimum hours of training and development required for insurance and funeral plan employees.
The regulator is also inviting views on whether it should limit the scope of some rules to UK customers.
The consultation comes following the FCA's commitment to withdraw over 100 pages of outdated guidance in a bid to streamline its rules and improve outcomes for consumers after the introduction of the Consumer Duty.
The FCA is asking for comments on the proposals by 2nd July 2025.
Matt Brewis, director of insurance at the FCA, said: “We are stripping back our insurance rulebook by removing ineffective, outdated or duplicated regulation, as part of our drive to become a smarter regulator and support growth.
“We have listened to industry and we are taking action - in doing so we will reduce regulatory costs and increase the competitiveness of the already world-leading UK insurance sector, while maintaining vital protections for smaller customers.”
Richard Jackson, managing consultant at Capco, commented: "There is an obvious risk that any loosening of product value checks could potentially heighten the risk of customer harm, so the industry’s input on the regulator’s proposals will be interesting. The FCA will leave firms to determine their own approaches based on their self-assessment of the risks posed by their products, which carries risk that a particular interpretation by a firm isn’t the correct call.
“Firms should utilise their Three Lines of Defence model to ensure they have a robust product governance operating model in place and that any relaxation of product checks stands up to internal scrutiny across the second and third lines. Relaxation of the frequency of periodic checks needs to be commensurate with the potential risk of harm posed to the intended target market, particularly if that target market is a firm’s retail customers and SMEs.”
James Daley, managing director of consumer group Fairer Finance, added: "While we agree with the regulator removing duplication in its rulebook - and agree that Consumer Duty supersedes many of the old rules - this is undoubtedly a fragile moment for the consumer protection landscape. Consumer Duty is still in its infancy - and many firms are falling well short of the high bar that these new rules set. Removing old rules still feels a little premature, with the FCA seemingly scrambling to meet the Government’s deregulatory agenda.
“It’s important that the FCA continues to emphasise the importance of Consumer Duty - and replaces any rules that it removes with very clear guidance around its expectations. There is a danger that some firms will sense that the pressure is off - and will see this as a moment to halt the progress that the Duty demands.”
