FCA’S NEW REGULATORY PRIORITIES: WHAT THE INSURANCE REPORT MEANS FOR ADVICE FIRMS

The FCA insurance regulatory priorities begin with a detailed report on the insurance sector. While aimed at insurers and intermediaries, the FCA insurance regulatory priorities also contain clear expectations for financial advice firms, particularly those involved in protection advice or insurance distribution. The themes align closely with existing Consumer Duty requirements.

Consumer Understanding and Claims Experience

The FCA places strong emphasis on customer understanding. Firms must ensure that consumers know what their insurance or protection product covers and what it does not cover. Customers must also receive fair, prompt and transparent service when they make a claim.

For advice firms, this means they should:

• Provide clear and balanced explanations at the point of sale, particularly around exclusions, limitations and suitability

• Deliver communications that genuinely support understanding, rather than relying on technical disclosure

• Monitor post-sale outcomes where they retain an ongoing role, including claims support or signposting

Consumer Duty remains central to these expectations. Firms need to demonstrate how they test, monitor and respond to consumer outcomes in practice.

Access to Protection and the Protection Gap

The FCA also highlights the need to improve access to insurance and protection. This is particularly important for consumers in vulnerable circumstances. Advice firms that operate in the protection market should take note.

The FCA’s interim findings from its pure protection market study suggest that the market works well in many areas. However, firms must do more to reduce the protection gap and increase consumer awareness and engagement.

Firms should review:

• Whether their propositions meet the needs of different client groups

• Whether their advice process supports informed decision making

• How they assess and evidence fair value, including where they offer premium finance or regular payment options

Innovation, Technology and Oversight

The FCA supports innovation, including the use of technology and artificial intelligence. However, firms must monitor consumer outcomes closely and manage risks effectively.

Although the FCA directs much of this message at insurers, advice firms should apply the same standards. Firms that use new tools, platforms or automated processes must maintain strong governance and oversight. They should embed Consumer Duty considerations throughout their systems and controls.

Simplification Without Lower Standards

The FCA intends to simplify insurance regulation and data requirements where possible. This does not signal lower expectations. Instead, the regulator expects firms to focus more clearly on delivering fair value and good consumer outcomes.

Even firms that do not specialise in insurance should review the report. The priorities reinforce the importance of clear communication, strong oversight, fair value assessments and outcome-focused monitoring across protection and insurance distribution activities.