The FCA has published CP26/2– Simplifying the Insurance Rules, marking the next step in its programme of reducing unnecessary regulatory complexity across the insurance sector. Following the introduction of the Consumer Duty and the first phase of insurance reforms in 2025, the FCA is now looking at where existing Handbook requirements can be streamlined, modernised or removed altogether. The aim is not to reduce consumer protection, but to eliminate duplication and give firms greater flexibility in how they achieve good customer outcomes. For insurers and insurance intermediaries, the consultation presents an opportunity to reduce administrative burden and simplify existing compliance processes without changing the fundamental standards expected by the regulator.
Who is affected?
The consultation will be relevant to:
- Insurers;
- Insurance intermediaries and brokers;
- Funeral plan providers and intermediaries;
- Appointed representatives undertaking insurance distribution activities; and
- Firms involved in the manufacture or distribution of insurance products.
What is changing?
Rather than introducing new obligations, the FCA is reviewing existing rules to determine whether they remain necessary in light of broader regulatory developments, particularly the Consumer Duty. The consultation includes a number of measures intended to make the Handbook easier to navigate and more proportionate in practice.
- A more flexible approach to customer communications
One of the key themes is giving firms greater flexibility in how they communicate with customers. The FCA recognises that many disclosure requirements were introduced at a time when paper-based communications were the norm and believes firms should have greater freedom to provide information in ways that better reflect modern customer expectations. The consultation also questions whether certain prescribed disclosures continue to provide meaningful value where the same information is readily available elsewhere.
- Removing duplication
Since the Consumer Duty came into force, many firms have enhanced their governance and customer outcome frameworks. Against this backdrop, the FCA considers that some existing ICOBS requirements duplicate broader obligations already placed on firms. Removing unnecessary overlap should allow firms to focus on delivering good customer outcomes rather than complying with multiple rules aimed at achieving the same objective.
- Streamlining the Handbook
The consultation also contains a number of technical amendments, including conversion of Euro denominated PI insurance limits to Sterling, to simplify both insurance and funeral plan rules, making them clearer and easier to apply in practice while maintaining existing consumer protections. Although many of the changes are relatively modest in isolation, together they continue the FCA’s wider programme of making the Handbook more proportionate and accessible.
What should firms be considering?
Whilst the proposals are unlikely to require significant implementation projects, they provide a good opportunity for firms to review existing compliance arrangements.
In particular, firms may wish to consider:
- whether customer communications could be simplified or modernised;
- whether internal policies and procedures contain requirements that go beyond what may ultimately be required;
- whether compliance monitoring programmes should be updated if prescriptive rules are removed; and
- how they will continue to demonstrate good customer outcomes under the Consumer Duty if firms choose to adopt more flexible approaches.
Looking ahead
The consultation closes on 4 September 2026, after which the FCA will consider industry feedback before publishing its final rules. Whilst CP26/22 does not represent a wholesale overhaul of the insurance regime, it is another clear indication of the FCA’s regulatory direction. Rather than relying on increasingly detailed and prescriptive rules, the regulator continues to place greater emphasis on firms exercising sound judgement, maintaining effective governance and delivering good outcomes for customers.
How Complyport can help?
- Regulatory gap analysis: Reviewing policies, procedures and customer documentation against the proposed changes to identify where requirements may be simplified or updated ahead of the final rules.
- Consumer Duty and ICOBS reviews: Assessing whether customer communications, disclosures and distribution processes remain compliant whilst taking advantage of the greater flexibility proposed by the FCA.
- Governance and compliance framework reviews: Helping firms ensure that governance, oversight and compliance monitoring remain proportionate and effective as prescriptive requirements are removed.
Contact Us
To discuss how the FCA’s proposals may impact your business, speak to one of our experts.
Alternatively, explore our Virtual Compliance Assistant: https://vica.chat
