- The FCA plans to narrow the scope of its Consumer Duty rules for certain wholesale financial firms.
- Insurance companies could face simpler regulations, with greater flexibility in communicating with customers.
- The proposals are expected to reduce compliance costs while maintaining protection for UK consumers.
The Financial Conduct Authority (FCA) is proposing a series of changes that could affect how financial firms operate in the UK, from insurers and brokers to businesses that sell financial products. While most consumers are unlikely to notice an immediate difference, the regulator says the changes are designed to cut unnecessary red tape for firms without weakening protections for retail customers.
At the heart of the reforms is the Consumer Duty, a set of rules introduced to ensure financial firms deliver good outcomes for customers. The FCA now wants to make it clear that the rules were never intended to cover every business transaction, particularly those involving sophisticated financial firms outside the UK.
Less red tape, same consumer focus
Under the proposals, wholesale brokers, reinsurers and other firms dealing with customers who have no clear connection to the UK would no longer fall within the scope of the Consumer Duty. The regulator believes this will remove unnecessary compliance requirements for businesses while allowing it to focus its oversight where consumer protection matters most.
The FCA also plans to provide clearer guidance on where the rules apply, particularly for firms involved in complex financial products or distribution chains where responsibilities can overlap.
Simon Walls, Executive Director of Markets at the FCA, reportedly said the Consumer Duty is helping improve outcomes for retail customers but was never designed to act as a wholesale rule governing transactions between sophisticated market participants. He added that refining its scope would provide greater certainty for firms while keeping the emphasis on consumer protection.
Insurance firms could also see simpler rules
Alongside the Consumer Duty changes, the FCA has launched a consultation on proposals to simplify insurance regulation. The consultation will run until September 2026 and, if adopted, the reforms would apply across the UK's insurance sector, including insurers, intermediaries, Lloyd's market participants and Gibraltar-based firms regulated by the FCA.
Among the proposed changes are removing disclosure requirements that the regulator believes offer little value to customers, allowing firms to communicate more through digital channels and simplifying rules for advised insurance sales. The FCA also plans to replace euro-denominated minimum professional indemnity insurance requirements with equivalent values in pounds.
For consumers, the proposals are unlikely to change the protections they receive. For financial firms, however, the reforms could reduce compliance costs and simplify how they meet regulatory obligations. The consultation will determine whether the proposed changes strike the right balance between easing regulation and maintaining confidence in the UK's financial services sector.
