In a co-ordinated release with the new 5-year strategy, the FCA has released its Feedback Statement on “Immediate areas for action and further plans for reviewing FCA requirements following introduction of the Consumer Duty” following the Call for Input in July 2024. Whilst a first glance at the covering communications might suggest this is primarily focused on consumer finance, investment and mortgage providers, the reality is that there are plenty of changes proposed that will benefit insurance firms.

It has used the update as its first opportunity to evidence the change in approach signalled in its news strategy paper, which we have reviewed in more detail in this related article. With a further update promised in September 2025, the review outlines four core areas designed to streamline compliance while enhancing consumer outcomes and is notable for the fact the FCA has announced it will “use an accelerated consultation process to act immediately on the measures in this paper where there is a clear case for change and where there is stakeholder appetite to go quickly.”

These are proposals that are very likely to make the UK a more attractive jurisdiction for those seeking to invest in, innovate and grow their insurance businesses.

The Proposed Approach

The review commits to a four-pronged approach that streams actions into four groups – things it is committing to do; things it is proposing to do; things it is already doing and next steps.

Reviewing the foundations

A key focus is a review of the international application of conduct rules in the insurance sector – clearly there was very strong support for this as the FCA has committed to doing this, against a ‘proposal to’ review the broader international conduct rules. Firms will also welcome the proposal to ensure more consistency in the definitions used, such as that of an SME.

Future-proofing disclosure

The majority of these actions relate to other sectors within financial services, with only the work to simplify rules around financial promotion rules for consumer credit and the disclosure of APRs having the potential to impact insurance firms to any degree.

Reducing the administrative burden

The work on simplifying the rules for commercial and bespoke insurance business is now given a timeline for action, with the FCA ‘committing to’ a consultation paper (CP) to be published by Summer 2025, slated to include additional proposed changes including:

• allowing firms greater flexibility over how often they review product value under the product governance rules;
• removing the specified minimum hours of training and development required for insurance employees;
• limiting the application of conduct rules, such as the Duty’s requirements, outside the UK;
• reviewing some of the more detailed and prescriptive product-specific rules in the Insurance Conduct of Business Sourcebook, including those for packaged bank accounts and GAP insurance;
• offering funeral plan providers greater flexibility regarding how often they review products under the product governance rules.

Other areas where the FCA is ‘proposing to’ take action include a review of the reporting requirements that were introduced under GIPP and whether there is a need to provide more clarity on how the rules on product governance and fair value in the Consumer Duty interact with each other and those elsewhere in the Handbook.

Firms involved in the distribution of retail products, who are not the final party in the chain dealing with the retail consumer, will be pleased to note that there is also a ‘proposal to’ look at how the rules operate, work that will address the challenges that exist where complex distribution chains, such as those involving Managing General Agents (MGAs), are in place.

Streamlining requirements

A commitment to review and retire outdated requirements and “areas of unnecessary complexity” will be welcomed by all firms. And it is an area where we are likely to see some of the swiftest action from the FCA, with historic supervisory communications likely to be a relatively easy action for the FCA to deliver.

Smaller regulated firms are also being offered more assistance, with the FCA looking to see how it can develop more helpful guides to implementing the outcomes-focused regulations, something it has committed to delivering in 2025 in pilot form.

Outdated regulatory requirements will be removed from the Handbook, such as references to Principles 6 and 7 and Treating Customers Fairly. In itself, this may not sound like a significant benefit, except of course that it helps focus attention on the rules that matter. An update to the FCA Handbook website is also planned to ensure ease of use.

Conclusion

As the FCA seeks to reduce regulatory complexity, insurance firms will benefit from a more outcomes-focused approach. From retail to large complex commercial risks, firms involved in all aspects of the insurance market are likely to benefit from the new approach being delivered by the FCA particularly wholesale firms dealing with overseas customers though there are improvements for UK centric firms as well. Firms should prepare for these upcoming changes, with a focus on simplifying operations and aligning with the clarified Consumer Duty rules.

The Feedback Statement is notable for being an FCA document that makes virtually no reference – explicit or implicit – to growth and innovation. But this is clearly a plan of action developed very much with the secondary international competitiveness and growth objective in mind. Everything committed to, proposed or planned (at least in so far as the insurance market is concerned) has the potential to make transacting insurance business as a carrier or distributor in the UK more attractive. When taken alongside the other commitments made in the 5-year strategy paper, this will all be welcome news to firms currently or considering investing in the UK.

As with all change, however, there will be a downside. It will be short-lived but firms will need to address their policies, procedures and reporting templates to align them to the new rules once they are implemented. For once, we feel that this may be activity which reaps the benefits of welcome regulatory change and brings a reduction in bureaucracy.

If you would like to discuss any aspect of the FCA actions considered in this article, please speak with the author or your usual ICSR contact.