Welcome to the UKGI weekly regulation update service for Aviva ABC brokers

Context

The FCA has published the final report for its premium finance market study MS24/2.  In its press release, the FCA sets out its view that the falling cost of premium finance are saving consumers around £157m per year, with over half the firms the FCA reviewed as part of a market study lowering the cost of premium finance due to regulatory attention, fair value assessments and base rate reductions.  The review report reveals that overall costs have dropped, and many firms demonstrated fair value.

Throughout this market study, the FCA has sought to address poor consumer outcomes directly, without needing to make new rules.  Where necessary, though, the FCA will pursue stronger supervisory action to address concerns around the provision of fair value and will continue to monitor prices in the premium finance market. Where any further competition issues arise because of its monitoring going forward, the FCA will use its supervisory and other regulatory tools to address any poor practices.

The report states that “The market is meeting the needs of many customers, but high prices persist. We [the FCA] want to see firms continue to focus on fair value and we will continue to review individual firms’ fair value assessments. We will monitor prices and act against individual firms if necessary.”

Key points to note

• Premium Finance remains a valuable product.
• Interest rates for premium finance have fallen by an average 4.1 percentage points since 2022, saving consumers £8 on a typical motor policy and £3 on a typical home policy per year. The changes result from regulatory attention, fair value assessments and base rate reductions.
• The FCA has seen even more significant changes made by firms it identified as at highest risk of not providing fair value, following direct engagement with them. These firms reduced APRs by 7 percentage points on average – saving £14 on a typical motor policy and £4 on a typical home policy per year.
• The FCA has confirmed it will not introduce a price cap or mandate that premium finance is provided without interest, as this could restrict access to important cover for customers who can only afford to pay monthly.
• Since the Consumer Duty came into force in 2023, firms have been required to undertake fair value assessments to demonstrate if the price a consumer pays for a product or service is reasonable compared to the overall benefits they can expect to receive.  This includes premium finance products.
• There are no significant findings which will impact firms, and there are no proposed rule changes. The FCA will continue to monitor and supervise firms under the existing rules and particularly Consumer Duty and PROD and fair value assessments (FVAs).

The main findings:

• There are no significant findings which will impact firms, and there are no proposed rule changes. The FCA will continue to monitor and supervise firms under the existing rules and particularly Consumer Duty and PROD and FVAs.
• The FCA has seen firm ‘own initiated’ reductions in costs to customers, as well as some firms who have been nudged by the FCA to take action.
• A key message to firms is to ensure that they are carrying out FVAs on premium finance, standalone and together with the insurance as a package, reducing costs and taking action where required.  The FCA’s focus on ensuring that customers get fair value when paying for insurance monthly has seen costs fall.
• The final report includes good and poor practice on a range of areas, including FVAs, whilst also acknowledging the role of the broker and relationship between the parties in the distribution chain.
• The report includes commentary on premium finance pricing models (chapter 4), the premium finance distribution chain (chapter 5, in which commissions / overriders are discussed), and the FCA’s next steps (chapter 6).

Good practice and areas for improvement are provided in relation to fair value in premium finance.  These appear under a number of headings including the cost to the customer (prices), quality, vulnerability, collaboration between manufacturers and distributors, and cross‑subsidisation.

Context

Sheldon Mills delivered a speech at the FCA’s Supercharged Sandbox Showcase event, discussing the FCA’s long term review into AI and retail financial services.

Key points to note

In opening the speech, Mills highlighted that his past work with the FCA has taught him that “the real challenge in regulation isn’t dealing with what we already understand – it’s preparing for what we don’t”, confirming that the long-term review into AI is about the FCA “designing for the unknown”.

The speech covers the following topics:

• Why the FCA needs to design for the unknown – and why now:
  • Millions of UK consumers now use AI tools to interpret information, plan their lives, and make decisions, such as managing money and finances or even to generate recipe ideas from a photo of fridge contents
  • AI has long been used in financial services (e.g. fraud detection, trading systems, credit decisions).  By 2024, around 75% of firms were already using AI.
  • The past two years have seen major change due to generative AI, multimodal systems, and emerging AI agents.
  • Firms are already building AI tools for personalised financial guidance, improved customer journeys and better identification of vulnerable customers.
  • AI investment by firms will continue, and customer AI usage will keep increasing.
  • There is still uncertainty around which AI models will scale successfully, which risks will matter most and which mitigations will be effective.
• Exploring uncertainty through a considering a plausible scenario
  • Over time, consumers may increasingly use AI as an intelligent intermediary between themselves and firms.
  • Assistive AI is here today. Tools that explain products, compare options, prefill forms and highlight risks; supporting consumers without taking decisions away from them.
  • Advisory AI is emerging. Systems that nudge, recommend and encourage action – switching suppliers, reshaping budgets, refinancing at better rates. These tools promise better outcomes, but they also raise questions about transparency, neutrality and the basis of advice.
  • Autonomous AI is coming into view. Agents that act within the boundaries of the consumer sets – shifting money, negotiating renewals, reallocating savings, or spotting risks before the consumer even sees them. For many households, this will be transformative; reducing admin, improving decisions and cutting costs.
  • Agent autonomy brings deeper questions, such as; what happens when an AI agent makes a mistake? How do we ensure consumers understand enough to stay in control?  And what happens if commercial incentives quietly shape the recommendations people see?
• Consumer outcomes
  • The FCA wants to understand how firms can unlock opportunities to support better outcomes safely.
  • Risks include; consumers delegating decisions they don’t understand; people with patchy data histories facing new exclusions; scammers exploiting AI to mimic voices or create synthetic identities.
  • Some risks may be less visible but just as important, such as the embedding or amplifying of bias into an AI model, leading to systematically worse outcomes for some groups.  AI could make decisions that are technically logical but misaligned with a consumer’s real-world needs.  When decisions are powered by ever more data, firms must get transparency and data protection right.
• Competition, market structure and new entrants
  • AI could change the drivers of market power in ways we need to understand early. It could be the great leveller, giving a start-up the analytical power of a global bank. Or it could entrench the biggest players with the most data and the deepest pockets.
  • Big Tech firms may capture parts of the value chain without ever becoming regulated providers.
  • Consumers, through their personal AI agents, may drive much more rapid switching, reshaping who holds power in ways we’ve not seen before.
• What does all this mean for regulation?
  • Current regulatory frameworks were built for a world where systems updated occasionally, models behaved predictably and responsibility was clearly located within the firm. AI challenges all three of those assumptions.
  • Accountability under the SM&CR still matters – but what does ‘reasonable steps’ look like when the model you rely on updates weekly, incorporates components you don’t directly control, or behaves differently as soon as new data arrives?
  • As firms continue to develop AI assurance platforms to monitor, audit, and evaluate AI systems, what should the role of the FCA be?
  • The FCA wants to examine how AI will change the way it applies its rules and provide the clarity firms need. Designing for the unknown means building a regulatory model that can evolve with the technology – without compromising clarity or trust.

Context

The FCA has published a speech given by Sarah Pritchard, FCA Deputy CEO, at the ABI Conference 2026 in Westminster, in which she has said that the home, motor and travel insurance markets have “room for improvement” but has ruled out any wide-ranging action.  Pritchard makes the point that the UK Customer Satisfaction Index shows the insurance industry understands and cares for its consumers but also that, for markets to continue to grow, firms must feel confident enough to explore new ways to unleash innovation.

Key points to note and next actions

• Insurance helps consumers navigate their financial lives and supports businesses and the economy. It’s essential it succeeds and thrives.
• Innovation is crucial to the industry’s success, and the FCA is playing its part by providing the necessary support and tools.
• The FCA will remain focused on driving better consumer outcomes, but is also championing flourishing wholesale markets.
• Consumer trust is low but can be built. This will take greater transparency and adherence to the standards set by the Consumer Duty.
• The speech outlines the nature of FCA support to allow firms to innovate, and sets out what the FCA sees as its role.
• Pritchard outlined the importance of ‘bringing the customer with you’ and discussed how the FCA will be ‘looking ahead’ for consumers and wholesale markets.
• Pritchard wants firms to engage with the FCA, early and often; in return the FCA will be clear about its priorities, and will be on hand with the practical support firms need to innovate with confidence.

Context

The FCA has published an article by Graeme Reynolds, FCA Director of Competition and Interim Director of Insurance, asking if firms can provide evidence that their customers are getting a fair deal.  Reynolds states that If they cannot, then they need to look again.

Key points to note and next actions

• Explaining what ‘fair value’ means in financial services, Reynolds states that it is a simple question: “are customers paying a reasonable price for a product, compared to the benefits they get in return?”.
• Reynolds provides two areas where the FCA’s work has helped firms demonstrate value better – cash savings and customers paying monthly for their insurance – with some insights in relation to premium finance in relation to challenging firms to improve, and how the FCA will continue that challenge.

Context

The OFSI has confirmed that, following the closure of the OFSI Consolidated List of Asset Freeze Targets, new regime pages have been created to host future sanctions notices.  These notices will cover all changes to designations made under each regime on the UK Sanctions List. The old financial sanctions regime pages will remain available for reference, but will no longer be updated with new sanctions notices.  You can find all new regime pages on with  Current UK sanctions regimes links to each individual regime page.

Key points to note and next actions

• The individual pages are split into two groups, being regimes listed by country (e.g., Afghanistan, Myanmar, Russia et.) and regimes listed by ‘theme’ (e.g., chemical weapons, counter-terrorism, global human rights etc.).
• A guidance page is available to describe the recent changes.

Context

AB has announced In its new 2026-28 strategy that it is reaffirming its commitment to building a trusted insurance sector, investing in people and the planet, and shaping an effective market.  Following a successful three-year period, during which the ABI strengthened the sector’s role in supporting financial resilience and wellbeing across the UK, the new strategy takes this a step further to drive more progress and respond to emerging challenges.

Key points to note and next actions

• The strategy sets out how the ABI will deliver its strategic priorities, its planned organisational outcomes, its hopes for a trusted sector, its aims for a sector which is invested in people and the planet, and an effective insurance market.
• In order to deliver a trusted sector, continuing to put customers at the forefront of the ABI’S work, the ABI will deliver initiatives that improve people’s understanding, experience and trust in insurance and long-term savings.
• In relation to being invested in people and the planet, the ABI has long supported efforts to unlock opportunities for productive investment to drive sustainable growth.  Under the new strategy, this work will continue with a renewed focus under the ABI’s new Pensions Insurance and Investment Board (PIIB).
• To help create an effective market, the ABI sets out that a proportionate and stable regulatory framework underpins growth, competitiveness, innovation and investment in the UK. The ABI will work closely with members and regulators to streamline processes, reduce duplication and improve efficiency.