The UK insurance market is vast, dynamic, and critical to the financial wellbeing of individuals and businesses alike. From life insurance and pensions to motor and home cover, consumers rely on insurance providers to deliver when it matters most. Overseeing much of this sector is the Financial Conduct Authority (FCA) — a regulatory body tasked with ensuring firms act in the best interests of their customers.
But what exactly does the FCA do in the insurance sector? What are its objectives? And how does it ensure firms play fair? This blog explores the FCA’s core mission and how it applies specifically to insurance.
Who Is the FCA?
The Financial Conduct Authority (FCA) is the UK’s primary conduct regulator for financial services firms, including insurers, brokers, and intermediaries. It was created on 1 April 2013, replacing the conduct functions of the former Financial Services Authority (FSA), as part of reforms following the 2008 global financial crisis.
The FCA operates independently of the UK government, though it is accountable to Parliament and funded by fees paid by the firms it regulates.
The FCA’s Strategic and Operational Objectives
The FCA has a strategic objective and three operational objectives under the Financial Services and Markets Act 2000 (as amended):
Strategic Objective:
To ensure that relevant markets function well.
This high-level goal means that the FCA must work to support healthy competition, transparency, and integrity in the markets it regulates — including insurance.
Operational Objectives:
Consumer Protection
To secure an appropriate degree of protection for consumers.
In insurance, this includes ensuring that:
-Products meet customer needs
-Sales processes are fair and transparent
-Claims are handled promptly and fairly
Integrity
To protect and enhance the integrity of the UK financial system.
In insurance, this covers:
-Preventing fraud and mis-selling
-Ensuring accurate reporting
-Promoting trustworthy conduct among insurers and brokers
Competition
To promote effective competition in the interests of consumers.
The FCA aims to stop anti-competitive practices and make sure consumers can access a diverse and innovative insurance market.
The FCA’s Role in Insurance
The FCA regulates a wide range of insurance-related firms, including:
-General insurers (e.g., home, car, travel)
-Life insurers and pension providers
-Insurance intermediaries, brokers, and comparison sites
-Managing General Agents (MGAs)
Its key responsibilities include:
1. Authorisation
Firms must be authorised by the FCA (or PRA, depending on their size) to carry out regulated insurance activities. This ensures only firms that meet certain standards can enter the market.
2. Supervision
The FCA supervises firms based on their size, risk level, and potential to harm consumers. This includes:
-Monitoring conduct
-Reviewing communications and disclosures
-Conducting thematic reviews
3. Enforcement
If firms breach regulations, the FCA can:
-Fine them
-Restrict their operations
-Ban individuals from working in the industry
Notable enforcement actions have included mis-selling of PPI and failures in fair pricing practices.
4. Policy and Rulemaking
The FCA develops rules and guidance for the sector, such as:
-Treating Customers Fairly (TCF)
-Insurance Conduct of Business Sourcebook (ICOBS)
-Pricing Practices Rules (2022)
-Consumer Duty (2023)
Landmark FCA Initiatives in Insurance
General Insurance Pricing Practices Review (2021)
The FCA addressed the “loyalty penalty,” where long-term customers paid more than new ones. From January 2022, firms must offer equivalent renewal and new business prices for the same product.
Consumer Duty (2023)
A major reform requiring insurers to:
-Offer products that deliver fair value
-Communicate clearly
-Provide support throughout the customer journey
This raises the bar for all firms, with a strong focus on outcomes, not just compliance.
Vulnerable Customers and Inclusion
The FCA has issued guidance to help firms identify and support vulnerable customers, including those with disabilities, mental health issues, or financial difficulties.
Why the FCA’s Work in Insurance Matters
The FCA's work ensures that:
-Consumers can trust the insurance products they buy
-Firms compete fairly and transparently
-Markets remain resilient, even in times of stress
This ultimately strengthens confidence in the insurance industry — a crucial pillar of the UK economy and society.
The FCA plays a vital role in shaping and safeguarding the UK insurance market. With clear objectives focused on consumer protection, market integrity, and competition, the FCA ensures that insurers and intermediaries act fairly, transparently, and in the best interests of customers. As the insurance landscape evolves — with digital innovation, climate risk, and changing consumer needs — the FCA’s role becomes more important than ever.
