Briefing: Is the FCA finally getting serious about reducing the compliance burden?

The insurance industry has long lamented the regulatory burden under which it operates.

Last week, Biba chief executive Graeme Trudgill described the UK insurance market as “one of the most, if not the most, expensive regulatory systems in the world” when he sat alongside me on the panel of an Insurance DataLab webinar, held on 4 June 2025.

The regulator, however, finally appears to be taking notice of broker complaints and, on the same day as Insurance DataLab’s webinar, the FCA hosted its own online session to dispel some of the myths around Consumer Duty and fair value assessments.

The regulator’s webinar also aimed to set out ways in which the FCA was looking to ease the regulatory burden, by cutting out areas of rulebook duplication and increasing flexibility.

One of the key areas the FCA is focusing on to reduce the regulatory workload could be of particular benefit to brokers that design their own products – defined as so-called co-manufacturers under Consumer Duty rules, which came into effect from July 2023.

Under this particular proposal, firms involved in co-manufacturing would be able to name a lead manufacturer to take responsibility for governance and compliance. This lead manufacturer would then be responsible for the governance and compliance requirements of Consumer Duty, removing the need for all parties to carry out the necessary work.

The regulator was also keen to point out that assessing and monitoring fair value is primarily the responsibility of the insurer. While distributors are expected to understand the target market and avoid any actions that could erode value – such as excessive fees – the regulator reiterated that there is no requirement for them to reassess an insurer’s fair value assessment.

Insurers are also beneficiaries of this more proportional approach to regulation, with the regulator proposing to remove the mandatory 12-month fair value assessments and instead allowing insurers to assess products at a time frame they believe are suitable to each individual product.

This flexibility should allow insurers to focus their compliance efforts on new and higher risk products, while lower risk offerings can benefit from streamlined reporting requirements that do not need to be conducted as frequently.

This change does, however, mean that the regulator is once again leaving Consumer Duty open to interpretation – and it emphasised that this flexibility should not be regarded as an opportunity for only conducting fair value assessments when an insurer feels like it.

Insurers will still be expected to reassess products more frequently than their stated time period if underlying data indicates any material changes in how the product is performing.

Has a turning point been reached?

One area where clarity is certainly being offered, however, is around the overall scope of Consumer Duty, with the FCA now proposing that the regulation is narrowed to only apply to firms whose customers are eligible to be managed by the Financial Ombudsman Service (FOS).

This is a change the industry has long been calling for and, combined with the other proposed changes, it could go a long way to easing the regulatory burden that many in the market say has stifled the insurance industry.

The Labour government has already made clear, in a letter to regulators last December, that it wants them to “prioritise growth” and these changes from the FCA should help with that – something that is clearly needed, with Insurance DataLab research published in May 2025 revealing that growth across the UK broking market has slowed significantly.

Whether this marks a genuine regulatory turning point remains to be seen, but the signs of a more pragmatic regulator are at least starting to show.