The Financial Conduct Authority has announced plans to streamline its insurance rulebook, in a move designed to reduce costs for insurers and improve access to coverage for businesses and consumers.
The proposals, published today, form part of a broader effort by the regulator to modernise its rulebook following the introduction of the Consumer Duty.
Under the proposals, the FCA intends to remove requirements that are outdated, duplicated or considered ineffective. The changes aim to ease compliance burdens without compromising consumer protections, particularly for smaller businesses and individuals who may be more vulnerable.
Among the more significant proposals is a new definition to distinguish large commercial customers from smaller ones. The move would exclude larger, more sophisticated clients from certain conduct rules, on the grounds that they are capable of managing risk independently. At the same time, protections would remain in place for smaller commercial clients.
Further proposed changes include scrapping the obligation for insurers to review product value on a fixed annual basis. Instead, firms would assess the frequency of reviews based on the nature and risk profile of each product. The FCA also plans to allow a single lead insurer to take responsibility for regulatory compliance when multiple parties are involved in designing a product, broadening access to bespoke contract exemptions, and removing requirements such as minimum annual training hours for insurance and funeral plan staff.
Matt Brewis, director of insurance at the FCA, said: “We are stripping back our insurance rulebook by removing ineffective, outdated or duplicated regulation, as part of our drive to become a smarter regulator and support growth.
“We have listened to industry and we are taking action – in doing so we will reduce regulatory costs and increase the competitiveness of the already world-leading UK insurance sector, while maintaining vital protections for smaller customers.”
The regulator is also consulting on whether some rules should be limited to UK-based customers only. The proposals follow a wider FCA initiative to withdraw over 100 pages of legacy guidance, part of its post-Brexit effort to cut red tape and align regulation more closely with current market needs.
However, the plans have drawn criticism from some quarters. James Daley, managing director of the consumer group Fairer Finance, warned that the move may be premature, given the early stage of the Consumer Duty’s implementation.
“While we agree with the regulator removing duplication in its rulebook – and agree that Consumer Duty supersedes many of the old rules – this is undoubtedly a fragile moment for the consumer protection landscape,” Daley said. “Consumer Duty is still in its infancy – and many firms are falling well short of the high bar that these new rules set.”
He added: “Removing old rules still feels a little premature, with the FCA seemingly scrambling to meet the Government’s deregulatory agenda. It’s important that the FCA continues to emphasise the importance of Consumer Duty – and replaces any rules that it removes with very clear guidance around its expectations. There is a danger that some firms will sense that the pressure is off – and will see this as a moment to halt the progress that the Duty demands.”
The consultation is open for comment until 2 July.
