The FCA’s Consumer Duty will reach its third anniversary in July 2026. Introduced as a significant enhancement to retail conduct standards, the duty is now firmly established as the central framework through which the FCA assesses consumer protection across the UK financial services sector, including insurance.

This article considers the key areas where FCA expectations are evolving in the insurance sector, and the practical implications for insurers and intermediaries as the duty continues to mature.

1. From implementation to outcomes

The Consumer Duty, codified in PRIN 2A, introduced a new Consumer Principle requiring firms to act to deliver good outcomes for retail customers (PRIN 2A.2.2R), supported by cross‑cutting rules (PRIN 2A.2.5R–2A.2.7R) and the four outcomes framework (PRIN 2A.3–2A.6). However, as the regime matures, the FCA’s Consumer Duty focus areas for 2025–2026 emphasises reliance on the duty as an outcomes‑focused regime. The flexibility this brings is accompanied by a more demanding evidential standard. Firms must be ready to demonstrate how governance, product design and operational delivery translate into measurable improvements in consumer outcomes.

The annual Consumer Duty board report is central to this approach. Firms must prepare a report for their board assessing the outcomes delivered and identifying any remedial actions required. The FCA’s Consumer Duty Board Reports: good practice and areas for improvement (December 2024, updated 2026) makes clear that this process should facilitate meaningful board challenge, rather than serve as a purely descriptive exercise. However, FCA commentary indicates that many firms continue to struggle to translate management information (MI) into actionable insight. The FCA’s expectation is that firms use MI to evidence a clear feedback loop between monitoring, decision‑making by the board and remediation.

For insurers and intermediaries, this has practical implications. Governance must be outcome‑centric, with boards questioning whether products, pricing and claims handling deliver fair outcomes. Importantly, this obligation extends across distribution chains, requiring firms to evidence oversight of intermediaries, delegated authority arrangements and outsourced service providers.

2. Consumer understanding

Consumer understanding has emerged as a central supervisory focus under the duty. Although firms often rely on technically accurate disclosures, the FCA’s March 2026 publication, Consumer understanding: good practice and areas for improvement (March 2026) reiterates that compliance is not achieved through disclosure alone. Instead, the consumer understanding outcome under PRIN 2A.5 requires firms to ensure that communications support effective, timely, and properly informed decisions. However, the FCA has been clear that this reflects existing obligations under PRIN 2A.5 and Finalised Guidance FG22/5, rather than representing entirely new rulemaking.

What is notable is the FCA’s increasing emphasis on how this outcome is evidenced. Firms are expected to adopt an insight‑led approach, using complaints data, behavioural analytics and customer testing to identify the areas which customers struggle to understand and to assess whether changes would lead to improved understanding. In practice, this involves:

• integrating multiple sources of insight to identify points of confusion or poor decision-making; and
• assessing end‑to‑end customer journeys, particularly for vulnerable customers.

Although these individual data points are valuable, the unifying concept is traceability. Firms must demonstrate a clear evidential chain from an identified misunderstanding to the subsequent intervention and measurable improvement. This expectation is reinforced by Finalised Guidance FG26/2, which makes it clear that ineffective communication can cause foreseeable harm. Firms must, therefore, take proactive steps to rectify this harm under the cross-cutting obligations in PRIN 2A.2.5R. For insurers and intermediaries, this has implications beyond communications teams. Product documentation, policy wording and claims communications must all be assessed not simply for technical compliance, but for whether they support real consumer understanding at key decision points.

3. Claims handling

Claims handling has become one of the clearest expressions of how the duty applies in practice. Although the FCA identified examples of good practice in its publication, Home and travel claims handling arrangements: good practice and areas for improvement (July 2025), it also found material deficiencies. These flaws particularly related to the oversight of outsourced arrangements and the use of MI. Ultimately, the claims journey is the critical moment where consumers determine whether a product delivers in practice.

But the more important development here is conceptual. Claims handling is no longer assessed solely against detailed ICOBS rules, but also judged through the overarching obligation to deliver good outcomes under PRIN 2A. To meet this standard in practical terms, firms must actively change their approach to:

• maintain robust, outcome‑focused claims MI capable of identifying trends and harm;
• exercise effective oversight of outsourced claims handling arrangements; and
• adopt customer‑centric approaches to claims settlement, avoiding unnecessary friction, delay or rejection.

Although outsourcing is a standard industry practice, it does not displace regulatory responsibility. Insurers cannot delegate their accountability and, of course, must evidence active oversight across all managing general agents, third-party administrators, and third-party networks. However, the biggest shift is how the regulator monitors this. From a regulatory perspective, claims data and complaints trends are no longer just operational metrics but are now treated as primary indicators of whether a firm is delivering good outcomes under the duty.

4. Fair value

The FCA’s supervisory, thematic review and market study work illustrates how the price and value outcome under PRIN 2A.4 is being operationalised. The FCA's TR24/2 (August 2024, updated December 2025), assessed a sample of general insurance and pure protection products across certain firms and found that many firms were not delivering fair value to their customers. It made clear that firms who fail to demonstrate fair value consistently, can expect  regulatory intervention. This was evident in the FCA's intervention in the guaranteed asset protection (GAP) insurance market, where having written to firms requesting immediate action and finding their responses unsatisfactory, a majority of firms, at the time, were ultimately required to pause sales of GAP insurance until fair value could be demonstrated.

The FCA's Premium Finance Market Study (MS24/2, February 2026), shows a different point on that spectrum. Although the FCA identified concerns around premium finance pricing and competition in its study, it declined to introduce a market-wide APR cap. Instead, the regulator is relying on calibrated supervisory engagement to drive improvements. The FCA observed that the cost of paying for insurance monthly had fallen following the introduction of the duty, which was, in their view, the direct result of intense supervisory scrutiny, which forced firms to justify and improve their fair value assessments. However, the absence of prescriptive intervention does not signal reduced regulatory pressure. The FCA has indicated that it will continue to monitor premium finance practices closely and intervene directly where harm is identified (and as we have already observed).

For insurers and intermediaries, this reinforces that pricing models must be defensible and evidence‑based, and that fair value assessments must extend across distribution chains, including commission structures and ancillary products. More broadly, firms should expect targeted, data‑driven supervisory challenge, particularly where outcomes differ across customer cohorts.

5. Complaints and redress

The final area of development concerns the increasing emphasis on proactive remediation. Although firms traditionally wait for formal complaints, FG26/2 and CP26/9 (Modernising the redress system), make it explicit that firms must now take reasonable steps to identify and rectify harm early. This includes potentially providing financial redress without waiting for consumers to complain.

This mandate builds on existing obligations contained within DISP 1.3.3R and DISP 1.3.6G. However, the key development is that complaints and redress are no longer treated as downstream, isolated processes and are instead reframed within a broader, duty-aligned expectation. The biggest shift is that these metrics are now viewed as primary indicators of whether firms are identifying foreseeable harm. In practice, firms are expected to:

• use complaints data and root cause analysis to identify systemic issues;
• initiate remediation exercises proactively where harm is identified; and
• ensure governance frameworks support escalation, decision‑making and oversight.

At the same time, CP26/9 proposes reforms to improve the predictability and efficiency of the redress system, including changes to the Financial Ombudsman Service process designed to facilitate earlier, more consistent resolution. For insurers, particularly those with high‑volume claims and complaints portfolios, this represents a material shift towards continuous monitoring and proactive intervention.

Looking Ahead

Three years on, the Consumer Duty is firmly established as the primary framework through which the FCA assesses consumer protection in the UK insurance sector. While the underlying rules in PRIN 2A have not materially changed, supervisory expectations continue to evolve, driven by thematic reviews, supervisory engagement and targeted reform initiatives rather than new rulemaking.

The FCA’s approach is increasingly characterised by outcomes-based supervision, supported by comparative analysis of firm practices and a growing emphasis on early identification and remediation of harm. For insurers and intermediaries, this creates a clear evidential challenge. It is no longer sufficient to demonstrate compliance with the rules and firms must be able to evidence, through robust MI and governance processes, how customer outcomes are assessed, monitored and improved on an ongoing basis. Those able to demonstrate a clear link between customer insight, decision-making and remediation will be better positioned to meet supervisory expectations, while firms that cannot are likely to face more targeted regulatory scrutiny.