FCA Simplifies Rules, But Will it Lower Costs For Insurers? -

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Here’s the latest from the FCA, plus some industry comments;

The Financial Conduct Authority (FCA) has confirmed changes to simplify its rules and lower costs for insurers, while maintaining appropriate levels of protection for smaller commercial customers.

The regulator’s final rules aim to give more flexibility and responsibility to insurance firms, such as determining the frequency of their product reviews and how much continual professional development (CPD) staff should undertake.

The FCA will make further changes to its insurance rules and cut unnecessary requirements next year, including reviewing the international application of its rules and the Consumer Duty.

Separately, the regulator has also published proposals that will benefit insurers and other firms, including a raft of technical changes to streamline its rules and reduce complexity following the introduction of the Consumer Duty. This includes proposals to:

remove 3 further insurance data returns
review eligibility and disclosure rules for packaged bank accounts (PBA)
streamline and simplify rules on collective investment client assets
remove Handbook references no longer needed now the Consumer Duty is in force.

The FCA has also set out wider plans to better support smaller financial firms by creating sector guides to help them apply outcomes-based regulation, starting with consumer credit firms next year. The pilot will inform the FCA’s longer-term approach to supporting smaller firms.

Graeme Reynolds, 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.

“Our focus on smarter regulation is not once and done, and by using the Consumer Duty we’ll continue to look at rules we may no longer need. We want firms to keep engaging with us on further simplifications for the insurance sector, so we can support growth and innovation.”

COMMENTS;

BROADSTONE

Cormac Bradley, Senior Actuarial Director at leading independent insurance consultancy Broadstone, commented:

“Today’s FCA policy statement is a targeted, proportionate tidy up of UK insurance conduct rules, not a wholesale rewrite. It trims requirements that had become overlapping with Consumer Duty or overly prescriptive, while keeping protections intact.

“Three areas will be felt most on the front line: a clearer boundary for larger commercial customers vs SMEs, more flexible competency/CPD frameworks (with accountability squarely on firms) and a streamlined approach to Employers’ Liability register reporting. At the same time, the FCA has parked wider changes, notably GAP and non-UK business scope, for further consultation in 2026. Watch this space.

“It’s a welcome recalibration: reduced friction and more judgment led governance for insurers and brokers, without diluting consumer outcomes. The test now is execution, firms must use the extra flexibility wisely, and the FCA’s oversight will matter in ensuring good value and robust disclosure where it counts.

“Overall, this is not going to get pulses racing, but it is a good instance of the regulator and market practitioners working together to keep the rule book fit for purpose. The direction of travel is the important thing.”

LMA

Comments here from Sheila Cameron, CEO of the Lloyd’s Market Association, in response to this morning’s statement from the FCA on their “Simplifying the Insurance Rules” consultation.

“The LMA are pleased that the FCA continues to focus on regulatory simplification in its announcement today. However, it represents a missed opportunity for meaningful simplification in the commercial and specialty insurance sector. The FCA have taken small steps by allowing insurers to take a proportional approach to the frequency of fair value assessments of their products and not prescribing mandated hours for training These measures are incremental and fall short of delivering any substantive change for insurers operating at Lloyd’s.

“For three years, the LMA has worked closely with the FCA on two critical issues: the territorial scope of the rulebook and the definition of “consumer.” Both have significant implications for the Lloyd’s marketplace and remain unresolved. A clear definition of consumer and a more proportionate territorial scope would materially reduce unnecessary regulatory burdens while ensuring genuine retail customers receive appropriate protection.

“We therefore join the LMG in urging the FCA to deliver these substantive reforms within the next 12 months and to honour its original promises to the LMA on this topic. Only by addressing these long-standing issues can the FCA achieve the level of regulatory clarity and efficiency that the London market requires.”

SICSIC ADVISORY

Hugh Savill, Senior Advisor, Sicsic Advisory, said:

“The FCA has decided not to allow MGAs to act as lead co-manufacturer. This decision runs contrary to the views expressed by the majority of the responses to the consultation, and represents a missed opportunity to place regulatory responsibility in the same hands as product and market expertise.

The FCA gives its reasons as a preference for insurer oversight of MGAs, citing insurers’ responsibility for claims, and concerns about MGAs’ financial capacity to pay redress. The FCA’s reasoning is not consistent with the realities of today’s specialty market, and suggests that the industry needs to do more to explain where the strengths of the MGA business model lie.”

CII THOUGHTS

CII Statement on FCA’s CPD consultation decisions

The Financial Conduct Authority (FCA) has announced within its Policy Statement on Simplifying the Insurance Rules (PS25/21), issued today, that it will be removing its mandatory 15-hour Continuing Professional Development (CPD) requirement so that firms can have greater flexibility for deciding how to ensure appropriate competency and capability.

The CII reflected the views of our members and challenged the proposal during the regulator’s consultation process. The FCA acknowledges this feedback in its Policy Statement and emphasises that its decision is “not intended as a relaxation of the overall competence and training expectation in our rules”. It adds: “Investment in training and development improves standards that build trust in the sector among consumers and corporate buyers, thereby supporting growth.”

The CII welcomes this positioning, alongside the regulator’s reference to the change making “no difference for members of professional bodies who are subject to their mandatory CPD requirements.” We are also pleased that the FCA specifically recognises the benefit of “the CII’s Professional Map, [which] can help individuals and firms identify training and development needs and plan appropriate CPD.”

We noted in our consultation response that there will always be a balance to be struck between rules and regulations, and the responsibility on professionals to do the right thing. By supporting our members to do just that – through the Professional Map – we give the FCA the freedom to focus on creating and enforcing detailed rules where competitive pressures make other voluntary arrangements difficult to sustain.

We would like to thank the FCA for engaging so openly with us and our members and look forward to continuing to work closely on our shared goal of building and maintaining trust in the insurance profession.

IUA

Responding to the Financial Conduct Authority’s Policy Statement 25/21 ‘Simplifying the insurance rules’, Nafisah Hussain, Acting Director of Public Policy at the International Underwriting Association, said:

“We welcome the FCA’s latest policy statement on Simplifying the Insurance Rules and acknowledge the progress made in responding to industry concerns. For some time, the London Market has sought greater clarity on the definition of a retail customer and confirmation that businesses with non UK clients should sit outside the scope of UK regulation. These are not abstract issues – they are fundamental to ensuring proportionate regulation and to delivering the Government’s ambition for economic growth.

“While the direction of travel is encouraging, the pace of change must accelerate. Policy only achieves its purpose when it delivers practical improvements at the frontline, where firms and customers feel its impact most directly. Clear resolution of these issues will provide the certainty needed to strengthen the UK’s competitiveness and reinforce its position as a global centre for insurance and financial services.

“We therefore urge that both the definition of a consumer and the treatment of non UK business be resolved conclusively by the end of 2026. Doing so will ensure regulation is proportionate, internationally aligned, and supportive of the UK’s long term growth ambitions.”

RSM UK

Erin Sims, financial services senior analyst at RSM UK said: “The FCA’s insurance simplification is a pragmatic shift to outcomes. With a single lead manufacturer, risk‑based product reviews and the removal of low‑value prescriptive requirements, the FCA is cutting duplication so firms can focus on where harm is likeliest. At a time where insurers are managing claims inflation, heavier weather losses and fast‑rising cyber incidents, proportional, risk‑weighted oversight is timely.

“This matters when motor claims reached £11.7bn in 2024, weather‑related payouts have run above £100m for seven straight quarters, and cyber claims are increasing, with 51% of insurance claims now involving ransomware and malware*.

“It should free intermediaries and insurers to invest in innovation and better service for their customers. This simplification comes as insurers look to unlock productivity through AI while grappling with low technology budgets and legacy constraints. Smarter regulation helps firms prioritise high‑harm products efficiently, investing time and talent into better underwriting, faster claims and resilient digital operations.”