Context
The FCA has announced that it will simplify its insurance rules, publishing Consultation Paper CP25/12. The Regulator plans to strip outdated or duplicated requirements from its insurance rulebook, having asked what improvements it could make. The Consultation comes following the FCA’s commitment to withdraw over 100 pages of outdated guidance in a bid to streamline its rules, and its July 2024 Discussion Paper DP24/1: “The Regulation of Commercial and Bespoke Insurance Business”.
The Consultation proposals have also been informed by the FCA’s recent review of its requirements following the introduction of the Consumer Duty and by its work on a Smarter Regulatory Framework. UKGI urges all insurance firms to read this Consultation and to respond where possible, particularly if you feel that there are further simplifications that can be made.
Key points to note and next actions
The regulator is proposing:
- to create a new definition (“contracts of commercial or other risks”) to identify large commercial insurance customers who should not be captured by its conduct rules (thereby determining which rules apply to commercial insurance) – for many insurance brokers dealing with SMEs, this may add a layer of complexity;
- to remove the requirement for firms to review the value of their product at least every 12 months, leaving it up to firms to decide how often to review them based on the risks and characteristics of each product;
- giving firms flexibility to appoint one lead insurer to comply with its rules in instances where more than one party is involved in designing the insurance product (to simplify some co-manufacturer requirements);
- broadening the scope of bespoke contract exclusions and making them easier for all insurers and brokers to use (the FCA explains that ‘bespoke’ contracts are built to suit one customer upon that customer’s request, which means they automatically have the protections product governance rules provide);
- getting rid of duplicative annual reporting and notification requirements for employer’s liability insurances (the FCA has added a link to the Consultation Paper to its ‘Tracing employers’ liability insurers’ web page);
- removing the specified minimum hours of training and development required for insurance and funeral plan employees; and
- to make necessary consequential rule changes resulting from the above proposals
The FCA is asking for comments on these proposals by 2nd July 2025.