The Financial Conduct Authority (FCA) has announced changes to simplify its insurance rules and reduce costs for insurers, while maintaining appropriate protection for smaller commercial customers, with further changes planned next year.
Next year, the FCA plans to make further changes to its insurance rules and remove unnecessary requirements, including reviewing the international application of its rules and the Consumer Duty.
It has also published proposals to benefit insurers and other firms, including technical changes to streamline rules and reduce complexity following the introduction of the Consumer Duty.
These proposals include removing three additional insurance data returns, reviewing eligibility and disclosure rules for packaged bank accounts, simplifying rules on collective investment client assets, and removing Handbook references no longer needed now that the Consumer Duty is in force.
In addition, the FCA has outlined 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.
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.”
In response to this announcement from the FCA, Sheila Cameron, CEO of the Lloyd’s Market Association, said, “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.”
Caroline Wagstaff, CEO of the London Market Group, commented, “The London Market has been asking for clarity on the definition of a retail customer for three years, as well the removal of business with non-UK customers from the remit of the UK regulators.
“We acknowledge the progress that has been made but the pace of change toward these goals is simply not fast enough. Policy has to result in a changed experience on the frontline.
“Defining what constitutes a consumer is the foundation for ensuring proportionate regulation and making the Government’s growth ambitions a reality. Without it, there can be no significant improvements that make the UK more internationally competitive. We would ask that both these issues are resolved clearly and finally by the end of 2026.”
Christopher Croft, LIIBA Chief Executive, added, “LIIBA welcomes the publication of the Policy Statement and will review its contents in detail before responding further. But, as we have consistently said throughout this process, the statement is aimed at providing a means for FCA to distinguish between retail consumer business and wholesale commercial. What will make an impact is how FCA uses that distinction to pursue a significantly different supervisory approach for firms that do not deal with consumers. What that different approach will be and how it will work is still to come. And it is that clarity that will allow us to judge the effect this initiative will have on our market’s international competitiveness.
“We note that the shift to treat overseas business as outside the conduct rules has been delayed until next year. This is disappointing. The pace at which regulatory change is delivered in UK is an issue that we would urge FCA and HM Treasury to address.”
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