What the FCA’s 2026 priorities mean for the insurance industry

In February, the FCA published its Regulatory Priorities report, replacing its previous portfolio letters with a single, sector-specific streamlined publication. The report signals the FCA’s shift to being a “smarter regulator – predictable, purposeful and proportionate”. The report spans the full scope of the industry, addressing retail and wholesale insurers, insurance brokers and intermediaries, price comparison websites, and funeral plan providers. The FCA’s four priority areas: improving consumer understanding, claims handling and service quality; increasing access to insurance; supporting growth and innovation; and simplifying regulation, all of which carry material consequences for insurers and brokers.

According to the latest FCA data, the insurance sector employs over 300,000 people, with the London market doubling in size over the past decade and contributing £61 billion to the overall UK GDP. In terms of its reach, it is estimated that over 86% of UK consumers hold at least one general insurance or pure protection product. Given its size and impact, it is unsurprising that the FCA has sharpened its supervisory focus, with particular attention paid to “stronger, faster action where harm is greatest”. The FCA has also moved towards intervention and enforcement action, emphasising that it will consider all available tools to combat consumer harm. According to the FCA’s Enforcement Watch publication, there are six active Consumer Duty investigations underway, highlighting the FCA’s transition from policy implementation to practical action.

The regulator expects firms to comply with the Consumer Duty, communicate clearly with consumers so they understand their cover, handle claims promptly, fairly, and transparently and monitor service delivery to ensure products continue to align with what has been promised. Supervisory and enforcement investigations regarding home and travel insurance claims will continue, as will testing of claims and service qualities to ensure good outcomes. The FCA is also reviewing the effectiveness of financial crime systems and controls across a sample of larger firms, with a good practice report to follow later in the year.

Regarding AI, the FCA is launching a review to assess how firms use AI in underwriting, claims and consumer services, and to identify barriers to adoption. Under the Senior Managers & Certification Regime (SM&CR), senior managers are required to demonstrate they understand and control risks within their area of responsibility. The FCA has made it clear that it is a reasonable expectation that senior managers comprehend the systems they knowingly deploy, and a lack of understanding is no defence. Stakeholders have noted that uncertainty about regulatory requirements could create a chilling effect, causing firms to forgo the benefits of AI for consumers. In contrast, hasty implementation without due diligence could lead to consumer harm, as discussed in the recent report into AI use in financial services published by the Treasury Committee.

For brokers, three workstreams stand out. First, the FCA is analysing how different sales processes impact consumer outcomes, with a specific focus on whether consumers properly understand their cover. Second, the FCA is expanding its review of outsourced claims processes to include different delegated authority models and remuneration arrangements, with findings expected to be released in early 2027. Third, new rules on reporting operational incidents and information on material third parties are due to be introduced which will impose fresh obligations on firms reliant on outsourced technology or claims management providers.

The FCA’s 2026 regulatory priorities mark a clear shift from embedding the Consumer Duty to actively testing whether firms are delivering good outcomes. The cumulative effect of the claims handling investigations, AI review, sales process reviews, delegated authority oversight, and financial crime benchmarking is a more intensive supervisory approach towards both insurers and brokers. The key consideration across all of these areas is the FCA’s stated intention to rely on existing rules, particularly the Consumer Duty, rather than creating additional prescriptive requirements. It is clear that the Consumer Duty remains the overarching framework for the FCA guiding its priorities and practices. The 2026 priorities set out the FCA’s trajectory, and it is expected that the industry understands and acts upon these initiatives.

To read the full report click here.