FCA consults further on simplifying UK insurance rules

Matt Saward, an insurance regulation expert at Pinsent Masons, was commenting as the Financial Conduct Authority (FCA) unveiled its latest plans to further streamline rules for insurers and insurance intermediaries, while maintaining protections for UK retail customers.

The consultation paper, CP26/22 (96-page / 1.11MB PDF), proposes giving firms greater flexibility in how they can provide disclosures to customers, including increased use of digital channels, as well as removing unnecessary disclosure requirements “that don’t meaningfully help customers make choices”. This includes removing information requirements around the firm’s postal address, categorisation as an insurer or an intermediary and certain remuneration information. 

It also proposes narrowing the territorial application scope of the FCA’s Insurance Conduct of Business Sourcebook (ICOBS) and Product Intervention and Governance Sourcebook chapter 4 (PROD 4) for non-UK business. Under the proposals, detailed conduct requirements for non-investment insurance would only apply where firms have “a clear UK connection” based on the customer’s habitual residence and, where relevant, the state of the risk.

The proposals aim to reduce unnecessary duplication and any potential conflict with overseas regulations. The FCA notes that responsibility for setting detailed consumer protection requirements in relation to non-UK business rests with the relevant local regulator. Nevertheless, the principles, other than the consumer duty, together with other high-level regulatory requirements, such as the senior management arrangements, systems and controls (SYSC) section of the FCA's handbook, will continue to apply to non-UK business.

The regulator also plans to create “a clearer boundary between advised and non‑advised sales” by introducing changes to the standards for advised sales of non-investment insurance contracts. Under the FCA’s proposals, a firm would be subject to the advice rules only where it provides a personal recommendation for the insurance it is selling.

The regulator also proposes to remove the requirement for firms to disclose whether they are giving a personal recommendation or advice on the basis of a fair, and personal, analysis of the market as this requirement is seen as adding little to customer understanding.

The consultation proposes to amend the currency denomination of minimum professional indemnity insurance (PII) levels for insurance intermediaries by converting the euro-denominated minimum limits of indemnity into sterling to “remove the dependency on GBP/EUR exchange rate movements and align the denomination of the requirement with the currency in which most UK firms transact and hold PII policies."

Saward said the proposals were a continuation of the FCA’s work to reduce the regulatory burden on firms. “CP26/22 continues the FCA’s journey towards a less burdensome approach to regulation. Insurers and intermediaries are likely to welcome measures that look to reduce duplication and provide increased flexibility in how they interact with customers, particularly in a digital environment. The key question now is whether firms can realise the benefits of simplification while continuing to demonstrate good customer outcomes under the consumer duty."

The proposals form part of the regulator’s broader plans to simplify regulations and reduce the cost burden for the UK insurance and funeral plan sectors that were announced in December 2025 when the FCA published a policy statement (74 pages / 869KB PDF).

The consultation on these latest proposals closes on 4 September. Given the nature of the issues consulted upon, the FCA propose that the rule changes will come into force shortly after they are made with changes to territorial scope to apply on a forward-looking basis only.

The FCA has also published a separate, but parallel consultation, on the scope and proportionality of the UK consumer duty and how specifically it should be applied to businesses with non-UK customers.

This consultation proposes reducing the consumer duty burden on wholesale financial businesses involved in retail markets and an exemption for overseas businesses. The consultation will close on 18 September.