Briefing

FCA consults on simplifying insurance rules and scope of the consumer duty

On 29 June 2026, the Financial Conduct Authority (FCA) published two consultation papers which will be of interest to the insurance industry:

Consultation Paper (CP26/22) on simplifying the insurance rules; and
Consultation Paper (CP26/23) on the scope and proportionality of the Consumer Duty.

A key theme across the proposals is that the FCA is attempting to reduce the regulatory burden on firms. Another is that the FCA is aiming to narrow the geographical scope of both the Consumer Duty and certain insurance regulations. Both of these themes are likely to be welcomed by the insurance market.

CP26/22 – Consultation on Simplifying the Insurance Rules

Consultation Paper CP26/22 comes as a sequel to Consultation Paper CP25/12 and the subsequent Policy Statement PS25/21 in the FCA’s efforts to simplify regulation for insurance firms. You can read our previous briefing on CP25/12 here and our previous briefing on PS25/21 here.

Narrowing the scope of the rules for non-UK business

In CP26/22, the FCA proposes to narrow the territorial scope of the Insurance: Conduct of Business Sourcebook (ICOBS) and Chapter 4 of the Product Intervention and Product Governance Sourcebook (PROD 4) in cases where there is little or no connection to the UK in the business being written. The aim is to ensure that firms are not subject to duplicative regulation.

The FCA proposes to:

Disapply ICOBS where both the customer’s habitual residence and the state of the risk (if different) are located outside of the UK. This disapplication would apply to both insurers and intermediaries throughout the distribution chain. Where either the state of the risk or the customer’s habitual residence is in the UK, ICOBS would continue to apply as normal.
Disapply PROD 4 where a product is exclusively for the non-UK market, i.e. where the policyholders are resident outside the UK and the risks are located outside the UK, and where an insurance product is only available for distribution to customers outside the UK.

Equivalent proposals to narrow the geographical scope of the Consumer Duty are also set out in CP26/23 and are explained further below.

Removing unnecessary disclosure requirements

The FCA proposes to remove disclosure requirements on firms which contribute to “information overload” and provide limited customer benefit. More specifically, the FCA proposes the following:

General firm and service level: To remove the requirement to disclose certain information about the firm, such as postal addresses, firm description (whether a firm is an insurance undertaking or an intermediary), and certain conflicts of interest information.
Remuneration: To remove the requirements derived from the Insurance Distribution Directive regarding disclosures concerning the nature and basis of intermediary and employee remuneration. Firms would still be expected to comply with their general law obligations, which may include commission disclosure.
Pure protection: To remove the prescriptive disclosure requirements in ICOBS 4.2 for pure protection business. The FCA believes that ICOBS 4.2 is no longer necessary, as the Consumer Duty now places a sufficiently strong obligation on firms to meet the information needs of retail customers.

Increasing flexibility in means of disclosure

The FCA proposes to remove the current default to paper-based disclosure contained in ICOBS 4.1A, to give firms flexibility to use different digital channels where appropriate to the context. Firms will still be required to provide paper copies free of charge on request and to ensure that the option to request documents in paper format is easily accessible.

By encouraging electronic communication, the FCA intends to make the rules better reflect how consumers buy and engage with insurance today and align the approach in the insurance sector more closely with the retail banking sector. The amendments may also help reduce costs for firms.

Standards for advised sales

The FCA proposes to simplify the rules on advised sales by removing the current distinction between “personal recommendations” and other things which may amount to “advice” but are not personal recommendations. This would mean that firms are only subject to the advice rules if they provide a personal recommendation for the insurance arrangements they are selling.

The FCA also proposes to remove the requirement on firms to disclose whether advice is given on a fair (and personal) analysis of the market.

The rules on non-advised sales will remain the same.

CP26/23 – Consultation on the scope and proportionality of the Consumer Duty

In September 2025, FCA Chief Executive Nikhil Rathi committed to addressing concerns about the application of the Consumer Duty to firms primarily engaged in wholesale activity with his ‘Mansion House commitment‘ letter to then-Chancellor Rachel Reeves. You can read our previous article on the FCA’s review of firms’ approaches to the Consumer Duty in 2025 here.

Geographical scope of the Consumer Duty

The FCA proposes to limit the scope of the Duty to retail market business where the retail customer is usually resident in the UK, as determined by their residential address or place of establishment. Where a product or service is sold to customers both inside and outside the UK, the FCA proposes that the firm must only comply with the Duty in relation to customers usually resident in the UK.

This proposal is aligned with the changes proposed in CP26/22 regarding ICOBS and PROD 4 (as set out above) and is intended to reduce regulatory overlap for firms serving overseas retail customers, who currently face duplicative UK and local regulatory requirements.

Scope of activities subject to the Consumer Duty

New chapter PRIN 3A of the Handbook: The FCA proposes to simplify the presentation of the Duty’s application provisions in the Handbook by consolidating the relevant provisions into a new chapter PRIN 3A.
Definitions and clarifications: The FCA proposes to clarify the definitions and scope of key concepts such as “retail market business” and “product”. The FCA also proposes to clarify the application of the concept of ‘material influence’, with its proposed clarifications focusing more on a firm’s role and the extent of its involvement with retail products and services.
Distribution chains: The proposals also include a clearer framework for determining which types of arrangements bring a firm within a distribution chain for the purposes of the Duty and providing different responsibilities for firms to reflect their different roles within a distribution chain.
Co-manufacturing: The FCA also proposes removing references to “co-manufacturing” from the Duty’s rules and guidance, replacing it with “principal” and “secondary” manufacturers, with secondary manufacturers being subject to more limited Duty obligations. The FCA does not expect its proposals to impact firms subject to PROD 4.

Proportionate application of the Consumer Duty

Vulnerable customers: The FCA aims to address customer vulnerability by proposing guidance clarifying that firms further removed from end consumers should consider how their activities (such as product design) pose a risk to vulnerable customers, while firms (such as distributors) which are closer to the customer bear more direct responsibilities for identifying and responding to individual customer needs.
Governance/board reporting: The FCA proposes targeted amendments to reporting requirements, clarifying that the extent and frequency of Consumer Duty reporting should be proportionate to the extent of a firm’s retail market business and activities, and that firms do not need to produce a standalone Consumer Duty board report if it would be disproportionate.
General clarifications and guidance: The FCA proposes to: clarify that firms are responsible only for their own role and activities and are not required to oversee the compliance of other firms in the distribution chain; permit firms to rely on information and representations provided by other firms in the distribution chain where reasonable; clarify that firms should notify the FCA only where they have material concerns about the conduct of another firm in their distribution chain; and introduce guidance to support a more proportionate and practical approach to information gathering and sharing.

Conclusion

CP26/22 remains open for comments until 4 September 2026 and CP26/23 remains open for comments until 18 September 2026. The FCA expects to publish a policy statement following CP26/23 in Q1 2027, but no time frame has been given for the FCA’s response to CP26/22.

Tom Gibbons, Trainee Solicitor, assisted in the preparation of this briefing.