The Financial Conduct Authority (FCA) has confirmed changes designed to simplify insurance regulation and reduce compliance costs for firms, while stating that protections for smaller commercial customers will be maintained.
Under the final rules, insurers and intermediaries will have greater discretion over how often they review products and how much continual professional development (CPD) staff are required to complete. The FCA said the measures are intended to give firms more flexibility and responsibility within an outcomes-based framework.
The changes form part of a wider post-Brexit and post-Consumer Duty recalibration, with the FCA signalling plans to remove more than 100 pages of legacy insurance guidance from the Handbook to streamline the regime.
The regulator previously said it wants a sharper distinction between large commercial customers and smaller firms or individual consumers, arguing that sophisticated entities can manage risk with less intensive conduct oversight.
The FCA also plans further amendments to insurance requirements next year, including reviewing the international application of its rules and how the Consumer Duty operates in practice. It is consulting on technical changes where the Duty has duplicated existing obligations or added complexity without materially improving outcomes.
Among the latest proposals are plans to remove three additional insurance data returns, review eligibility and disclosure rules for packaged bank accounts, and streamline client asset rules for collective investment schemes. The FCA also intends to delete Handbook references that are not needed now the Consumer Duty is in force.
The authority has outlined broader work to support smaller financial firms, including the development of sector guides to help them apply outcomes-based regulation. A pilot for consumer credit firms is due next year and is expected to inform the FCA’s longer-term approach to supervisory support for smaller entities.
Graeme Reynolds (pictured above), director of competition and interim director of insurance at the FCA, said: “We’re simplifying and removing rules for insurers and brokers, reducing regulatory costs and helping them focus on delivering better outcomes.”
He added that using the Consumer Duty, “we’ll continue to look at rules we may no longer need” and called on firms to keep engaging with the regulator on possible further simplifications.
Market bodies have broadly welcomed the direction of travel but highlighted concerns over scope, timing and international competitiveness.
Christopher Croft, chief executive of the London and International Insurance Brokers’ Association (LIIBA), said the policy statement provides a framework to “distinguish between retail consumer business and wholesale commercial”, but stressed that what matters is how the FCA applies a “significantly different supervisory approach for firms that do not deal with consumers.”
Croft noted that the move to treat overseas business as outside conduct rules has been deferred until next year, calling this delay “disappointing” and urging the FCA and HM Treasury to address the pace of regulatory change. He said clarity on the treatment of non-UK business will shape views on the UK market’s international competitiveness.
Caroline Wagstaff, chief executive of the London Market Group, said “the London Market has been asking for clarity on the definition of a retail customer for three years, as well [as] the removal of business with non-UK customers from the remit of the UK regulators.”
She argued that defining what constitutes a consumer is “the foundation for ensuring proportionate regulation” and warned that, without this, “there can be no significant improvements that make the UK more internationally competitive,” calling for both issues to be resolved “clearly and finally by the end of 2026.”
