FCA confirms rule simplification for insurers to reduce expenses

The UK’s Financial Conduct Authority (FCA) has confirmed changes aimed at simplifying its insurance rules and reducing expenses for insurers, while preserving suitable protection levels for smaller commercial customers.

This move is designed to provide “flexibility and responsibility” to insurance companies, allowing them to determine how often they review their products and how much continual professional development (CPD) is undertaken by staff.

The FCA has indicated that further adjustments will be made to insurance regulations in the coming year, including a review of the international application of its rules and the Consumer Duty.

The regulator has also, separately, published proposals aimed at benefitting insurers and other companies by streamlining technical requirements and decreasing complexity following the introduction of the Consumer Duty.

Among the proposals are the removal of three additional insurance data returns, a review of eligibility and disclosure rules for packaged bank accounts and simplification of rules concerning collective investment client assets.

The FCA also plans to eliminate handbook references that are no longer relevant since the implementation of the Consumer Duty.

The FCA has outlined broader plans to assist smaller financial operators with the creation of sector-specific guides to help them apply outcomes-based regulation.

The initiative will begin with consumer credit companies next year, and the pilot is set to inform the long-term approach of the FCA in backing smaller operators.

FCA insurance competition and interim director Graeme Reynolds said: “We are simplifying and removing rules for insurers and brokers, reducing regulatory costs and helping them focus on delivering better outcomes.

“Our focus on smarter regulation is not once and done, and by using the Consumer Duty we will continue to look at rules we may no longer need. We want firms to keep engaging with us on further simplifications for the insurance sector, so we can support growth and innovation.”

In July, the FCA found that increases in motor insurance premiums are due to “external cost pressures” and the claims handling practices of insurers.

The analysis highlighted that higher costs for vehicles, parts and labour, along with increased complexity in car technology and supply chain issues, have contributed to the rise in premiums.

“FCA confirms rule simplification for insurers to reduce expenses” was originally created and published by Life Insurance International, a GlobalData owned brand.

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