Briefing: Easing regulatory burden is no small feat as pressure mounts

New research published this month (1 May 2025) has attributed a definitive cost to the regulatory burden under which the UK insurance industry is forced to operate.

At a time when the FCA and Prudential Regulation Authority (PRA) are locked in a battle with the UK government over the latter’s keenness for regulation to be eased in order to drive economic growth, an investigation commissioned by trade body Biba and undertaken by business management consultancy London Economics has revealed that regulation costs amount to 5.2% of the insurance premiums collected.

The research, which covered commercial and personal lines businesses, explored both the direct and indirect costs associated with the FCA’s oversight.

Direct costs, according to the report, were described as the fees and levies paid, while indirect costs were defined as the expenses incurred to comply with regulation, such as the internal costs of staff and procured compliance services.

In terms of the indirect cost of regulation, measured as a percentage of collected premiums, this averaged 3.2% for brokers and 1.6% for insurers – these costs are seemingly higher for brokers despite their lower systemic risk.

Biba commented that this most recent research project builds on a previous 2023 study, which found that direct regulatory costs for brokers were 40% higher compared to 2019, while overall direct and indirect costs are equal to 8.1% of insurance mediation fees and commissions.

This amalgamation of findings has led the broker association to urge that regulatory costs are simply too high for brokers – and that there are reductions that could and should be made.

Predictions?

Biba is making the right noises about how it is already working with the FCA to see how and where the costs of regulation can be improved for its broker members.

With the government banging the deregulation drum since its appointment last July, some market commentators believe that combined pressure from both Westminster and Bevis Marks could bear real fruit with the regulator – if only to be seen to be keeping with the wishes of the Treasury.

For example, a reduction to the headline 5.2% regulatory cost figure could lead to cheaper coverage, encouraging business growth and an uptake in policy penetration.

The glass half empty perspective, however, is that the regulators are already in a fight to maintain what they view as being necessary rules to ensure that financial services firms treat customers fairly and are suitably financially robust.

Therefore, when faced with pressure from the Treasury, they are more likely to double down rather than be willing to entertain any pleas from the industry to reduce oversight.

All may well be revealed in Manchester at 2025’s Biba Conference, where Lisa Sturley – head of market interventions, insurance – will be on a panel to discuss what the FCA’s five-year strategy will look like in practice and how this will impact the wider industry and brokers.