FCA warns over-standardisation of insurance terms risks ‘hollowing out’ policies

Pushing standardisation of insurance terms “too far” risks “hollowing out” policies that can leave customers without adequate coverage, David Geale, executive director of consumers, payments and competition at the FCA, has warned.

Speaking before the House of Lords Financial Services Regulation Committee on (2 September 2026), Geale gave evidence for its inquiry into the regulation of the UK’s consumer insurance market.

Chaired by the Baroness Noakes DBE, the committee’s investigation sought to determine how the FCA regulates the general insurance market, responds to poor outcomes in home and travel insurance and collects and uses data on consumer outcomes.

While there is room for standardisation in areas such as premium finance, Geale suggessted that over-standardising insurance terms could be the wrong way to go.

He added: “If we start going too far with standardising insurance terms - firstly, that is not something we as a regulator can push, it would be something for parliament to do.

”But secondly, what you risk is actually hollowing out a policy to get to a particular point that then leaves some people not being served, or a whole series of add-ons start to come and it gets more confusing.”

He also said that ”standardisation can be important in some areas”, such as ”ensuring people get the right information in the right way”.

He added: “There will always be a role for detailed rules where perhaps they’re needed for something very specific, but the Consumer Duty gives more flexibility for firms and more flexibility for us to achieve the right outcomes.”

Consumer Duty important

Geale also noted that Consumer Duty has been “incredibly important” since its introduction in 2023.

He added that the regulator can point to a number of areas where there have been positive outcomes for consumers, such as Gap insurance.

”If we look at the Gap insurance market, we took action under the Consumer Duty looking at fair value and we’ve seen savings generated around £70m a year for consumers.

“In travel insurance, I mentioned the work we have done around requiring firms to point people to a directory of specialist insurers and we believe that’s helped contribute to around 21,000 more policies being sold as a result of that.”

Despite positive outcomes, however, Geale noted that there is further work to do.

“That’s why we have got a number of enforcement cases in place,” he said.

”So, we have six focused on insurance, looking at things like claims handling, information to consumers and so on, but its proving that’s got teeth.”