On Wednesday, 24 February 2026, the Financial Conduct Authority (FCA) published the first in a new series of reports designed to set out specific key priorities for various financial sectors and to replace its portfolio letters. These reports aim to provide a more consistent and direct way to communicate with industry participants and help firms understand what’s expected of them and where they need to focus. The reports will not only highlight the FCA’s priorities for each sector but also outline the work that the organisation will need to undertake in the next 12 months.
The first report focuses on insurance, with future editions covering pensions, retail banking, mortgages, consumer finance, wholesale buy-side, wholesale markets and payments. They are intended to outline the FCA’s priority areas of focus for firms in those sectors, helping them better understand the standards of compliance, innovation and consumer outcomes expected of them.
Here, we look at the FCA’s first edition of its Regulatory Priorities, focusing on Insurance, and assess what the implications for insurers are.
Background
The insurance industry plays a vital role in the UK economy, employing over 300,000 people and generating revenue of £89.3 billion in 2025. The latest statistics show that most adults (86% of the population, or 59.77 million people) hold at least one insurance policy and demonstrate that the insurance industry continues to play an important part of people’s financial planning and contributes towards a vibrant sector.
Focusing on the London Market, the FCA finds that it has doubled in size over the last ten years and is now worth around £138 billion, contributing £61 billion to overall UK GDP. The London Market is a global leader in underwriting complex and speciality risks and, despite a slight fall of 2% in premiums in Q3 2024, it remains internationally competitive, especially in retail and wholesale.
It’s against this background that the FCA has developed its regulatory priorities for 2026, focusing on themes that it sees as imperatives for the industry and highlighting what implications these areas have for insurers.
The report
The FCA’s report is intended for insurers, intermediaries, price comparison websites and funeral plan providers and outlines its expectations of boards and senior leaders in these markets for the year ahead. It provides information on several areas of focus, why those areas matter and what it expects of firms during the next 12 months.
The FCA report states that it wishes to be predictable and proportionate, that it wants firms to be responsible for delivering good outcomes for consumers and that it will take firm action to ensure that those outcomes are achieved.
Improving consumer understanding, claims handling and service quality
The report’s first priority is to ensure that the insurance claims system works properly in practice and expresses concern that too many customers face a poor claims experience, particularly in terms of home or travel insurance. These can be in the form of slow or ambiguous responses or weak oversight of outsourced claims providers.
The regulator cites Which? super complaint, which was brought on behalf of home and travel insurance customers and from which it says it has learned lessons. It has committed itself to continue supervisory and enforcement investigations on home, and travel claims handling, to review firms’ oversight arrangements and to drive improvements in consumer outcomes. It also says that firms need to do more to explain precisely what policies do and do not cover and to ensure that their communications are simple and effective. This applies not only to insurers but also to intermediaries, such as price-comparison websites.
These measures, which emphasise clear communication and fair claims handling, are designed to ensure public confidence, limit regulatory intervention and protect brand reputation by reducing complaints and strengthening long-term customer relationships.
Increasing access to insurance
The report’s second priority is to examine the question of who can afford cover and who cannot. The FCA is working with the government’s Financial Inclusion Strategy and Motor Insurance Taskforce to improve affordability and address exclusion, especially for vulnerable customers. Its areas of focus include:
- The low take-up of contents insurance among social renters
- The difficulties people with pre-existing mental health conditions find obtaining travel insurance.
The FCA stresses that firms should consider the findings of the two government reports and identify where they can make changes to improve access to insurance for vulnerable people and consumer outcomes.
On premium finance, the FCA’s market study found that the cost of paying for insurance monthly has fallen since 2022, saving consumers around £157 million annually. However, it stresses that firms must continue their Fair Value Assessments to ensure products still offer fair value and address areas that don’t.
In terms of pure protection, the FCA’s interim findings from its market study indicate that it is satisfied that the market is working well, but acknowledges that there are still issues, such as closing the protection gap in life and income protection cover, to address.
The FCA stresses that insurers and intermediaries should aim to widen access as part of their social responsibilities, a practice which will also benefit them through increased participation.
Supporting growth and innovation
The FCA’s report highlights how a competitive insurance market can attract inward investment, help develop new products and respond effectively to emerging risks. Innovation, it says, helps to grow the market and enables the UK to compete globally. Whilst supporting innovation to generate strong consumer outcomes, the FCA urges insurers to ensure that new technologies, such as AI and cyber-risk tools, are used responsibly, that they benefit consumers and that any risks are mitigated. The organisation encourages insurance firms to use its AI Lab and regulatory sandbox to test new initiatives.
In particular, the FCA intends to:
Review the risks and barriers to adopting AI in underwriting, claims, fraud detection and customer service and examine how the technology can potentially affect pricing fairness, transparency and dispute handling
Examine the cyber insurance market to mitigate digital risks and better understand coverage gaps and take-up obstacles, focusing on product complexity and pricing uncertainty
Consult with the Prudential Regulation Authority (PRA), on a new regulatory framework for captive insurance, an area which has the potential to strengthen the UK’s role in global insurance and risk transfer.
These measures are designed to drive operational efficiencies, generate new revenue streams, and improve customer service. However, the FCA expects firms to identify and manage risks early and to monitor outcomes closely to ensure transparency.
Simplifying regulation
In December 2025, the FCA published its policy statement on the simplification of insurance rules. The work to reduce duplication and unnecessary reporting continues this year, although consumer protection will remain at the forefront of any activities.
The aims include:
- Removing a number of pricing data returns
- Reviewing some reporting requirements
- Consulting on proposed changes to the international scope
- Working with HM Treasury and the PRA to review the Senior Managers and Certification Regime.
The FCA states that this will reduce duplication and will not lead to deregulation or detailed product-specific rules but, rather will provide clearer and broader principles and, most importantly, maintain consumer protection.
Other areas of supervision under review
The FCA is also turning its attention to:
- Reviewing outcomes for closed book life insurance products
- Assessing funeral plan rules that were introduced in 2022
- Strengthening financial crime systems and controls across larger insurers
- Introducing new rules on the reporting of operational incidents and third-party arrangements.
These proposals demonstrate that the FCA is committed to supporting governance, culture and operational strength.
In summary
What emerges as the FCA’s main priority in this report is Customer Duty. The organisation expects firms to achieve this through doing more to improve access to insurance, increasing innovation, ensuring fairness, clarity and transparency and taking a proportionate approach to oversight. It is these values, the FCA maintains, that should guide insurers’ decision-making in every aspect of the sector and it has put the industry on notice that it will act if these targets are not achieved.
The FCA’s approach is not merely about compliance or a dramatic change in direction, but more about gradual, consistent improvements to the industry. Senior leaders and boards should begin to act on this guidance by reviewing their internal processes and planning to identify gaps and address any weaknesses they observe to achieve a more successful, trusted, and competitive insurance market in the UK.
Brighter can support your insurance firm in implementing changes and improvements in areas of focus. Contact us for more information.
