FCA writes to the insurance sector: price, fair value and customer support

We saw several Dear CEO letters issued recently by the FCA, alongside the publication of the general insurance value measures data for 2022.  The Personal and Commercial Lines Insurance Portfolio letter (20th September 2023) set out the FCA’s priorities for the insurance market from 2023 to 2025.

The FCA acknowledges the vital role the insurance market plays in the UK economy, encompassing personal and commercial lines insurance, wholesale insurance, and life insurance sectors.

The FCA’s primary objective is to ensure that financial services markets, including insurance, function well and serve consumers’ long-term financial needs. However, the letter points out that the FCA has taken regulatory actions against firms for several failings, including

  • the continued sale of products not providing fair value;
  • paying away significant amounts of commission to third parties;
  • discriminatory pricing practices;
  • undervaluation of motor claims;
  • failure to implement general insurance pricing practices;
  • weak identification of vulnerable customers;
  • poor business interruption claims handling; and
  • instances of very long waiting times/settlement delays.

The FCA expects insurance firms’ boards to take proactive and concrete actions to ensure positive outcomes for consumers, rather than treating regulatory compliance as a formality.

The letter identifies five specific priorities for Personal & Commercial Lines insurance firms:

Price & Value:

Emphasising the implementation of the Consumer Duty, which places consumers’ needs at the forefront, and addressing issues related to products, pricing, consumer understanding, and support.

Consumer Support:

Providing customers with the appropriate levels of support and demonstrating that the operational processes support these objectives.


Improve information sharing and transparency when it comes to claims settlement options, in particular when dealing with vulnerable customers. The FCA would also like to see an improvement in the speed of claims settlement and a reduction in the number of claims complaints.


Removing barriers to accessing affordable and suitable insurance, referencing the Consumer Duty which requires firms to consider outcomes for different groups of customers.

Sales Practices:

Firms must ensure that marketing and sales practices do not cause poor customer outcomes, they go on to say that firms must ensure that any product they propose to the customer is consistent with their demands and needs and that customers must be provided with appropriate information about the product so they can make informed decisions.

Additionally, the FCA mentions broader regulatory priorities such as the Future Regulatory Framework, its secondary competitiveness objectives, and climate change risks. It urges firms to be informed about climate change risk impacts across their organisations.

The FCA also outlines the importance of culture, diversity, equity, and inclusion within insurance firms, along with the need to address non-financial misconduct.  These issues have been the subject of a Consultation Paper this week (25th September 2023).

Action for Firms

Ensure your firm meets the requirements, obligations and expectations, and takes all necessary action to ensure these are met while, at the same time, preparing for the additional requirements that the Consumer Duty brings to these areas. The FCA’s efforts over the next 2 years will be directed at testing firms against the priorities and expectations set out in the letter.

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