The Financial Conduct Authority (FCA) has launched a crucial consultation CP25/12: Simplifying Insurance Rules that aims at cutting red tape and transforming how insurance firms engage with their regulatory obligations. This is not just another tweak at the margins. It is a decisive move towards a smarter, leaner and more consumer-focused regulatory regime. And if you’re in the insurance sector, this is your early opportunity to shape the future.
What is the Consultation All About?
CP25/12 is the FCA’s proposal to repeal and replace large parts of the Insurance: Conduct of Business sourcebook (ICOBS) with a simplified, streamlined framework that reflects the regulator’s evolving approach under the post-Brexit UK regulatory model.
The FCA wants to ensure that insurance rules are:
- Easier to navigate
- Less prescriptive
- More outcomes-focused
- Tailored to the needs of UK markets and consumers
Key FCA Proposals
- Redefined “Commercial Customers” Scope
The FCA proposes to replace the outdated concept of “contracts of large risks” with a clearer, UK-specific definition of commercial customers. This would better align with thresholds used by the Financial Ombudsman Service (e.g. turnover under £6.5 million and fewer than 50 employees), potentially removing smaller firms from the scope of certain ICOBS and PROD rules. - Expanded Bespoke Contracts Exemption
Currently limited to insurers, the exemption would be extended to both insurers and intermediaries, provided the insurance contract is bespoke (i.e., not mass-marketed or widely distributed) and the product is non-investment in nature. This could significantly reduce product governance requirements under PROD 4 for tailored products. - Co-manufacturing Rule Streamlining
The FCA proposes a “lead manufacturer” approach in co-manufacturing arrangements. This allows one party to take primary responsibility for compliance with product governance rules, helping avoid duplication of effort and responsibilities across firms. - More Flexible Product Review Requirements
The current requirement for annual product reviews (under PROD 4.2.34R) would be removed. Firms would be allowed to determine review frequency based on product complexity and risk, supporting a more proportionate approach. - Employers’ Liability (EL) Reporting Simplification
The requirement for annual reporting of EL policies to the FCA would be scrapped. This reflects the availability of EL information through other channels and reduces duplication. - Simplified Training Requirements
The FCA proposes to remove the 15-hour annual CPD rule and related requirements under ICOBS 2.5 for distributors of non-investment insurance and funeral plan contracts. This change is aimed at reducing unnecessary administrative burdens while preserving key competency expectations.
Why It Matters
For insurers, brokers and other stakeholders, this proposed simplification is more than just a compliance update. It is a chance to:
- Lower operational and compliance costs
- Accelerate product development and go-to-market strategies
- Enhance consumer trust through clearer communications
- Engage with a more adaptive and principle-based regulatory approach
Your Feedback Matters
The consultation is open until 2 July 2025, and the FCA is actively encouraging feedback from across the industry. This is your opportunity to influence how insurance conduct regulation evolves in the coming years.
Next Steps for Firms
- Review CP25/12 in detail: particularly the proposed rule changes and rationales.
- Evaluate how the simplification will affect your current products, policies and processes.
- Engage internal stakeholders: legal, compliance, customer-facing teams to prepare a considered response.
- Submit your feedback to the FCA before the deadline.
How Complyport Can Help
At Complyport, we provide expert support to insurance firms navigating regulatory change, including consultations such as CP25/12. Our services are designed to reduce the compliance burden while enhancing your firm’s readiness for reform.
- Regulatory Impact Review: We assess how proposed changes, such as the simplification of ICOBS, affect your existing products, distribution strategies and compliance obligations.
- Compliance Framework Assessment: Our team evaluates your current compliance setup to ensure alignment with the FCA’s shift towards outcomes-based regulation.
- Consultation Response Support: We assist firms in drafting robust, strategic responses to FCA consultations.
- Regulatory Horizon Scanning: We help clients stay informed about future regulatory developments, including upcoming changes following CP25/12.
- Training and Staff Engagement: We offer targeted training sessions to legal, compliance and client-facing teams on how regulatory reforms like CP25/12 will affect day-to-day operations, enabling proactive compliance.
Book a meeting with one of our Subject Matter Experts today to start preparing for the FCA’s evolving insurance conduct framework.
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