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Dear CEO | Release Date: 20th September 2023

To read a shorter summary of this Dear CEO letter, click here.

To access the original FCA document, click here.

Long Summary

The Financial Conduct Authority (FCA) has outlined its regulatory focus for the insurance market covering 2023-2025, emphasising the life insurance segment alongside personal, commercial, and wholesale insurance. This sector-wide overview pinpoints potential risks and details the strategic directives firms must undertake to align with regulatory expectations.

Sector Overview and Economic Impact

The insurance market, a cornerstone of the UK economy, encompasses a diverse array of services crucial for both individual and corporate financial safety. The life insurance segment alone manages approximately £2.35 trillion across 90 million policies, highlighting its significance in financial planning and risk management for a substantial portion of the population. Meanwhile, the personal and commercial insurance lines cover essential protections like home and motor insurance, crucial for daily economic activities and stability.

FCA Strategic Objectives and Market Challenges

Strategic Focus

Under the Financial Services and Markets Act (FSMA), the FCA’s primary objective remains ensuring the efficient functioning of the financial markets, with a specific focus on the insurance sector’s role in supporting long-term financial stability and consumer protection.

Emerging Challenges

The sector continues to navigate significant challenges, including the lingering effects of COVID-19, escalating inflation, and the cost of living pressures. Furthermore, evolving risks such as climate change and technological advancements like artificial intelligence are reshaping the operational landscape, necessitating adaptive strategies to mitigate potential harms.

Regulatory Priorities for 2023-2025

Consumer Duty Implementation

A significant emphasis is placed on the Consumer Duty framework, particularly given the current economic strains affecting both consumers and firms. The FCA expects insurance companies to rigorously assess and enhance their product offerings and pricing strategies to ensure they meet the heightened standards of fairness and value, especially ahead of the Duty’s application to closed products in July 2024.

Governance and Culture

The FCA identifies poor governance and organisational culture as direct contributors to suboptimal consumer outcomes and operational failings. Firms are urged to promote diversity and inclusivity within their workforce to better understand and meet consumer needs, reflecting a broader commitment to enhancing industry standards and employee engagement.

Operational Resilience

Operational resilience remains a critical focus, particularly the management of risks associated with outsourced services and cyber security. The insurance sector is encouraged to develop robust contingency plans to handle potential disruptions effectively, ensuring continuous service delivery and safeguarding sensitive customer data.

Oversight of Appointed Representatives

The regulatory body notes particular concerns with the oversight of Appointed Representatives (ARs), emphasising the need for principal firms to maintain rigorous control and ensure their ARs adhere to the established regulatory standards. Enhanced rules have been implemented to strengthen this oversight, with ongoing evaluations to ensure compliance.

Future Regulatory Framework and Climate Change Initiatives

Looking ahead, the FCA plans to integrate broader regulatory reforms, such as the Future Regulatory Framework Review, which aims to refine regulatory practices to better suit the dynamic market environment. Additionally, the sector’s role in supporting the transition to a net-zero economy is highlighted, with expectations for firms to align their operational and investment strategies with sustainable practices.

Action Required from Firms

Firms are called to proactively align their operations with the outlined priorities, ensuring that governance structures, product designs, and customer interactions meet the elevated standards set forth by the FCA. Compliance with these directives is expected to be demonstrable, with firms prepared to adapt to regulatory changes swiftly to avoid potential enforcement actions.


As the insurance market continues to evolve amidst a complex array of challenges and opportunities, the FCA’s detailed guidance for 2023-2025 provides a clear roadmap for firms aiming to enhance their operational efficacy and consumer protection measures. By adhering to these guidelines, firms can ensure they not only comply with regulatory expectations but also contribute positively to the broader financial ecosystem, supporting both economic stability and consumer well-being.

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