This article examines the Financial Conduct Authority’s (FCA) expected priorities, the practical implications for insurers, and the areas where regulatory scrutiny is set to intensify for 2026.

Unlike the Prudential Regulation Authority (PRA), the FCA has not issued a dedicated “priorities letter” to insurers for 2026. Instead, its direction for the sector is set out across its FCA Strategy 2025–2030, the Annual Work Programme 2025/26 and the Regulatory Initiatives Grid. Taken together, these documents indicate the FCA’s focus on consolidating recent reforms, embedding outcomes-based supervision, and expecting tangible results from firms.

A summary of FCA initiatives and expected dates of implementation:

1. Moves to Outcomes

The FCA’s insurance agenda for 2026 is defined by a shift from prescriptive, rules-based regulation to a more outcomes-focused, principles-based approach. This is driven by the Consumer Duty, which is now fully in force for both open and closed products. The FCA’s Strategy 2025–2030 and Annual Work Programme 2025/26 make clear that it expects firms to demonstrate—using credible, outcomes-focused data—that their products, pricing, and customer journeys deliver good results in practice.

This direction is reinforced by a modernisation agenda. The FCA is actively streamlining and simplifying its rulebook, removing unnecessary complexity and aligning all requirements with the Duty’s focus on real-world outcomes. The regulator’s specific commitment to the Chancellor in September 2025 to clarify the Duty’s application to wholesale-facing firms underlines its intent to ensure proportionality and clarity across the sector.

2. Embedding the Consumer Duty

The Consumer Duty is the unifying principle shaping the FCA’s regulatory reform. The Duty requires firms to act to deliver good outcomes for retail customers, and to evidence those outcomes. The FCA’s ongoing programme to streamline its rules is designed to support this shift. Rather than relying on detailed, prescriptive requirements, the FCA increasingly expects firms to use the Duty as the focus for decision-making and compliance.

Recent and ongoing activity includes:

• The policy statement on simplifying the insurance rules (PS25/21), which clarifies the definition of commercial insurance customers and extends exemptions for bespoke contracts. This aims to remove unnecessary complexity and ensure rules do not distract from the Duty’s focus on outcomes.
• The consultation on targeted clarification of Handbook materials (CP25/37), published in December 2025, which proposes the removal of outdated rules and guidance and further aligns the Handbook with the Duty’s outcomes-based approach.
• The statement on firms working together to manufacture products and services, published in December 2025, clarifies the FCA and PRA’s expectations for firms collaborating within a distribution chain. This is directly linked to the Duty’s emphasis on shared responsibility for customer outcomes.
• A future consultation on changes to the rules and guidance relating to distribution chains, planned for Q2 2026, is expected to further refine the allocation of responsibilities between manufacturers and distributors in line with the Duty.
• A future consultation on disapplying the Duty in respect of business with non-UK customers, planned for mid-2026, reflecting industry concerns about cross-border proportionality.

This modernisation programme appears to be a deliberate effort to align the entire regulatory architecture with the Consumer Duty. The aim is to remove unnecessary complexity, clarify expectations, and ensure that firms are focused on delivering and evidencing good outcomes for all customers—whether retail or wholesale, UK-based or international.

3. Fair Value

Fair value has become the FCA’s primary diagnostic tool for assessing firm culture, governance, and product oversight. Insurers are expected to justify pricing, commission structures, and distribution arrangements with robust, outcomes-focused evidence. Where firms cannot demonstrate fair value, the FCA treats this as a governance and culture issue, not merely a technical failing.

The FCA’s scrutiny extends through distribution chains, reiterating through PROD 4 and its statement on firms working together to manufacture products and services that accountability for outcomes is shared across all parties involved. Complex or fragmented distribution arrangements are viewed as inherent risks that firms must actively manage—contractual boundaries are no longer a shield.

The FCA’s monitoring indicates limited tolerance for narrow pricing metrics or re-packaged legacy MI that fails to capture customer outcomes. Where fair value assessments are weak or superficial, the FCA increasingly treats this not as a minor technical shortfall, but as a cultural and governance issue. Price-to-risk mismatches, opaque remuneration models, and poor-quality MI may trigger supervisory intervention.

4. Claims Handling and Customer Experience

Claims handling is set to be the FCA’s most significant supervisory lever in 2026. The regulator views claims performance as the critical moment for earning or losing consumer trust. The FCA’s response to the Which? super-complaint and ongoing scrutiny of home and travel insurance highlight that issues such as complex exclusions, unclear cover, and slow claims handling are now seen as indicators of governance shortcomings, not just operational inefficiencies.

The multi-firm review on outcomes monitoring (June 2024; updated December 2025) found that many firms still rely on process-based MI and lack direct evidence of what customers actually experience, especially at the claims stage. The FCA’s planned consultation on distribution chains (Q2 2026) is expected to further clarify responsibilities for claims outcomes across the chain.

5. Premium Finance

The FCA’s final report on insurance premium finance (February 2026) confirms that premium finance remains essential for many consumers, being used in nearly half of motor and home policies. The report highlights ongoing concerns about fair value and market functioning under the Consumer Duty.

Premium finance was used across 23 million policies, delivered through insurers (58%), intermediary lenders (26%), and specialist premium finance providers (17%). The impact of the Duty has been significant: APRs have fallen by an average of 4.1% since 2022—rising to 8% where the FCA directly challenged firms—saving consumers an estimated £157 million annually.

However, the FCA found that some firms still relied on weak methodologies, overly favourable benchmarking, or failed to act on identified issues, and criticised over-reliance on specialist providers for fair value assurance. On competition, the FCA found no evidence of double-charging for credit risk or harm from exclusivity arrangements, though it expects firms to monitor these closely. Broker-linked finance remained more expensive on average, but not systematically harmful.

The FCA ruled out mandates such as 0% APR caps or commission bans, concluding they would risk reducing access and increasing premiums. Instead, the FCA will continue targeted Consumer Duty interventions. No new rules are proposed for now; the FCA will continue to monitor pricing through regulatory data, engage directly with outlier firms, and rely on Consumer Duty supervision to drive improvements.

6. IBIPs Reforms

2026 will also see the implementation of significant changes to the rules on Insurance-based investment products (IBIPs). The new regulated activity of “targeted support” launches in April 2026, creating a middle ground between execution-only and full advice. The consultation paper CP24/2 sets out the FCA’s proposals for this new activity.

The FCA will also finalise new disclosure rules for consumer composite investments (the DISC sourcebook), replacing the EU PRIIPs and UCITS regimes. The policy statement PS24/1 confirms the new rules will apply from April 2026, with a transitional period until June 2027. These reforms are designed to encourage consumer engagement and innovation, while maintaining strong, principle-based protections under the Consumer Duty.

What Should Insurers Expect?

The FCA’s insurance outlook for 2026 is clear: the regulator is consolidating its reforms and expects firms to deliver demonstrable, positive outcomes for customers. The burden of proof now sits with insurers. Firms must be able to show, with credible data, that their products, pricing, and distribution arrangements deliver fair value and that their claims handling and customer service meet the standards set by the Consumer Duty.

The FCA's supervisory intensity will be informed by the evidence firms provide. Those with strong governance and credible outcomes monitoring may benefit from a more proportionate approach, while those unable to evidence good outcomes should expect assertive regulatory intervention.