UK financial watchdog consults on simplified insurance rules

By Ryan Hewlett

May 14 - (The Insurer) - Britain's Financial Conduct Authority has laid out proposals to streamline its rulebook for the UK insurance market, including a potential simplification of regulations governing commercial insurers.

The watchdog, which is overhauling its regulation of UK financial services to bolster growth and competitiveness, said it plans to strip away “outdated or duplicated” rules to lower costs and improve access for policyholders while maintaining appropriate levels of protection.

“The UK’s world-leading insurance market could benefit from simpler, more straightforward rules,” the FCA said in a statement on Wednesday.

Under the plans, the FCA is proposing to create a new definition to identify large commercial insurance customers who should not be captured by its conduct rules. It said the move would ease the burden on firms insuring larger and more sophisticated buyers.

The regulator is looking to broaden the scope of bespoke contract exclusions, common in specialty market contracts and designed to meet a policyholder’s individual needs, to make it easier for other insurers and brokers to use them.

It is also proposing an end to rules requiring firms to review the value of their products every 12 months and the ability to appoint a single lead insurer in instances where more than one party is involved in designing a product.

The FCA has faced pressure from the government and industry trade bodies to reform regulation to help Britain's (re)insurers and intermediaries compete internationally and maintain London's position as the global hub for specialty and corporate risks.

“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,” said Matt Brewis, director of insurance at the FCA, in a statement.

The report's launch comes after FCA CEO Nikhil Rathi promised on the sidelines of the Association of British Insurers’ annual conference in London in February to take “bold” action by cutting red tape for UK insurers.

More recently, the watchdog in March pledged to slash more than 100 pages of guidance governing the sector following the introduction of the consumer duty. The rules came into force in July 2023 and built on existing regulation designed to ensure that products provide good value to customers.

The regulator is also inviting views on whether it should limit the scope of some rules to UK customers. The FCA is asking for comments on these proposals by July 2, 2025.