The Financial Conduct Authority has signalled tougher scrutiny of insurance claims handling while promising further simplification of industry rules.
The FCA set out its 2026 regulatory priorities for the insurance sector in a report published today (24 February).
The regulator said improving consumer understanding, claims handling and service quality will remain its central focus this year.
The FCA confirmed it will continue supervisory and enforcement investigations into home and travel claims handling, expand its review of firms’ oversight of outsourced claims processes, and assess whether value measures rules are delivering good outcomes.
Firms have been told to respond to claims “promptly, fairly and transparently”, and to test whether their products and services deliver what has been promised to consumers.
The regulator said too many policyholders still experience poor outcomes when making a claim, despite progress in some areas of the market.
The FCA’s timeline shows continued investigations into claims handling throughout 2026, alongside analysis of how different sales processes affect consumer outcomes.
It will also review governance and oversight arrangements, including delegated authority models and remuneration structures.
The FCA indicated it will take supervisory or enforcement action where it identifies serious misconduct.
The focus on claims standards comes as Consumer Duty expectations continue to underpin supervisory work across insurance markets.
The FCA also confirmed it will conclude its pure protection market study in the third quarter of 2026.
Interim findings published in January suggested the market works well in many respects but highlighted issues including the protection gap, consumer awareness and claims experience. The final report could lead to further reforms.
Meanwhile, the regulator will continue monitoring premium finance annual percentage rates following its recent market study, which it said has led to a significant reduction in the cost of paying for insurance monthly.
Alongside tougher scrutiny of consumer outcomes, the FCA said it intends to support growth and innovation in the insurance market.
It will evaluate how firms are using artificial intelligence in underwriting, claims and customer service, assessing both risks and barriers to adoption. Insurers have been encouraged to use the FCA’s AI Lab and sandbox services.
A review of cyber insurance coverage will also be undertaken, while the FCA and Prudential Regulation Authority will consult later this year on a new regulatory framework for captive insurance.
The FCA pledged to simplify insurance rules further during 2026.
Following a policy statement published in December, it will respond to consultations on removing product-specific rules, rationalising conflicts of interest requirements and deleting certain pricing practices data returns.
It will also consult on potentially disapplying the Consumer Duty to non-UK business and review the international scope of relevant conduct rules.
The regulator is also working with the Treasury and the PRA to review the Senior Managers and Certification Regime, with the aim of reducing its regulatory burden.
Behind the Headlines: The FCA says protection works – but the real test is closing the gap