UK FCA to Simplify Insurance Regulations, Support Smaller Insurers in 2025

The UK Financial Conduct Authority (FCA) is set to implement further adjustments to insurance regulations aimed at simplifying rules and reducing compliance costs for insurers while maintaining adequate protections for smaller commercial customers. A key focus of these changes is to grant more flexibility to insurance companies regarding product review frequencies and staff continual professional development (CPD). Upcoming regulatory revisions include a review of international applications of FCA insurance rules and enhancements related to the Consumer Duty, designed to streamline technical requirements and decrease regulatory complexity following the Duty's introduction. Proposals under consideration consist of removing certain insurance data submissions, revising eligibility and disclosure rules for packaged bank accounts, and simplifying rules around collective investment client assets. The FCA also plans to excise outdated handbook references rendered irrelevant after Consumer Duty implementation. Supporting smaller financial operators, the FCA will develop sector-specific guides grounded in outcomes-based regulation principles, starting with consumer credit companies. This pilot initiative aims to inform long-term regulatory approaches focused on facilitating growth and innovation among smaller firms. FCA insurance competition director Graeme Reynolds emphasized a strategic commitment to "smarter regulation," signaling ongoing evaluations to eliminate redundant rules and calls for sustained industry collaboration to identify further simplifications. This regulatory evolution aligns with broader efforts to optimize insurer focus on delivering improved customer outcomes while controlling regulatory burdens. Separately, FCA analysis has linked recent motor insurance premium increases to external cost pressures including higher vehicle, parts, and labor costs, growing vehicle technology complexity, and supply chain disruptions. These factors collectively contribute to upward premium trends, highlighting persistent market challenges for motor insurers. These developments in FCA insurance regulation reflect a wider industry shift towards flexible, outcomes-based compliance frameworks accompanied by targeted support for smaller insurers and brokers. Industry stakeholders should monitor these regulatory initiatives closely to adapt to evolving compliance expectations and capitalize on simplification opportunities.