FCA Moves to Streamline Insurance Rules While Keeping Customer Protections Intact

Key Takeaways

• Regulatory Simplification: The FCA has confirmed insurance rule changes aimed at reducing compliance costs and giving insurers greater flexibility in product reviews and staff training requirements.
• Further Reforms Ahead: Additional rule reviews are planned for 2026, including changes related to the international application of UK rules and the Consumer Duty.
• Technical Streamlining: The FCA has proposed removing three more insurance data returns, simplifying client asset rules, and cutting outdated Handbook references.
• Support for Smaller Firms: A new pilot will introduce sector guides, starting with consumer credit, to help smaller firms apply outcomes-based regulation.
• Consumer Focus Maintained: The reforms come as the FCA reviews a super complaint from "Which?" on poor outcomes in home and travel insurance, with a 90-day response deadline.

Deep Dive

The UK's Financial Conduct Authority (FCA) has confirmed a package of reforms designed to simplify insurance regulation, cut compliance costs, and give firms more flexibility, without weakening protections for smaller commercial customers.

Announced on 9 December 2025, the finalized rules shift more responsibility onto insurers themselves. Under the changes, firms will be able to decide how regularly their products should be reviewed and determine how much continuing professional development staff must complete. The FCA’s argument is that less prescriptive rules will free insurers and brokers to focus more on delivering good outcomes than ticking boxes.

But the regulator isn’t stopping there. Additional reviews of insurance requirements are planned for next year, including a look at the international application of UK rules and further refinements linked to the Consumer Duty, which has become the centrepiece of the FCA’s move to outcomes-based oversight.

Alongside the confirmed changes, the FCA has published further proposals that it says will streamline the regulatory landscape. These include scrapping three more insurance data returns, reviewing disclosure and eligibility requirements for packaged bank accounts, simplifying the regime for collective investment client assets, and removing outdated Handbook references now that the Consumer Duty has taken effect.

The regulator also outlined a broader plan to help smaller financial firms navigate rules more easily. Starting with consumer credit firms in 2026, the FCA will pilot new sector guides aimed at clarifying expectations and reducing the burden of interpretation for businesses with fewer resources. If successful, this approach could shape a new model for FCA guidance.

Graeme Reynolds, the FCA’s director of competition and interim director of insurance, said the agency’s push for simplification is ongoing.

“We’re simplifying and removing rules for insurers and brokers, reducing regulatory costs and helping them focus on delivering better outcomes,” he said. “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.”

The shift comes as the FCA considers concerns raised in a super complaint by consumer group "Which?" in September about poor value and weak customer outcomes in home and travel insurance. The regulator faces a 90-day deadline to respond with actions it will take as part of its Consumer Duty-driven reform program.

As the UK continues reshaping its post-Brexit regulatory framework, insurers appear set for more freedom but also a sharper focus on proving they are treating customers fairly.

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