Light Remedies, Heavy Expectations: Why the Insurance Sector Must Act Now

On 22 July, the FCA published its much-anticipated package of insurance market reforms. This included detailed papers on premium finance, claims handling in home and travel, cost drivers and claims in motor insurance, and an evaluation of the General Insurance Pricing Practices (GIPP) remedies and their impact on the market. 

Across the board, the papers highlight systemic weaknesses in how policies are priced and how claims are handled. Many of the issues identified are not new, but the fact that the FCA continues to see and raise them says a lot. Given the weight of evidence, many might have expected the FCA to go further—introducing price caps, outright bans, or targeted remediation. Instead, the regulator has chosen to continue its inquiries (in the case of premium finance, with a final report expected by the end of 2025) and/or continue to monitor the issues. 

Lighter touch than expected? 

A cynical person may wonder how much the political focus on growth and reducing regulatory burden has shaped the outcome. The package sharpens tone—but not tools. On one hand, the FCA is clearly linking its expectations to Consumer Duty and raising the bar on supervision. On the other, the actual interventions are lighter than many anticipated, placing the onus squarely on firms to recognise the issues and self-correct—under the regulator’s watchful eye. 

In our view, the message is clear: the FCA expects firms to respond now. It has laid out its concerns transparently. If the industry fails to take this opportunity, it’s hard to see the FCA holding back a second time. 

A Change in Supervision 

Under Consumer Duty, the bar has quietly but firmly been raised.  

These papers outline clear, foreseeable areas of harm, and the expectation is that firms will act without being pushed. 

This marks a shift to an open relationship with the regulator—one where firms engage openly, challenge themselves, and demonstrate accountability.  

Supervision through the Duty will require firms to: 

• Demonstrate fair pricing and value. 

• Test and evidence customer outcomes regularly. 

• Challenge themselves on where value may be unclear/eroded or where good outcomes are not being delivered; and 

• Come forward early when issues arise—rather than waiting to be found out. 

This is no longer about fulfilling minimum requirements, it is about setting yourself up in a way that delivers a good customer experience and outcomes, evidencing that this is taking place in practice and proactively and promptly intervening when this is taking place in practice.  

The papers quote numerous examples where this has not occurred. 

The papers make it clear that this will not be tolerable moving forward. 

The Risk of Silence 

If the FCA’s direction is towards greater collaboration and transparency with regulated firms, then one of the greatest risks is silence.  

Firms that fail to surface internal concerns—or worse, spot them and remain quiet—risk more than technical breaches. They risk breaching trust. And in the context of Consumer Duty, this is exactly where scrutiny turns into intervention. 

Next Steps 

The challenge for firms is clear: 

This is no longer about passive assurance—it’s about actively demonstrating that your products, pricing, and claims handling deliver good customer outcomes. 

Even those confident they’ve “got it right” must now take a hard look. Under Consumer Duty, intent is not enough—firms must be ready to evidence outcomes and explain their decision-making. 

A practical first step is to initiate a targeted gap analysis against the concerns raised in the FCA’s recent publications: 

Review your premium finance arrangements—can you justify the value provided relative to cost? 

Examine your claims handling and claims handling oversight (especially where services are outsourced, as third-party oversight always gives the FCA some meat to take back to the cave)—do your controls, your testing and your MI surface issues early enough and is this driving action? 

Revisit your fair value assessments—do they stand up to scrutiny in today’s cost environment? 

The FCA has made its expectations clear. 

The FCA is trusting firms to do the right thing. 

If that trust is breached, enhanced supervision or enforcement action may crystallise, and it may be swifter and more vigorous than we’ve seen before (as firms will have been given their chance). 

The opportunity now is to lead the response—rather than be subject to it. 

Look out for more detailed analysis of each of these papers and the specific issues contained therein over the next few days. 

If you would like to receive our detailed briefing note on the publications please reach out to: kate@avyse.co.uk, marc.ireland@avyse.co.uk or thominah.talukdar@avyse.co.uk