Insurance brokers: serving consumers and businesses in times of uncertainty and change

Speech by Sheldon Mills, Executive Director, Consumers and Competition, delivered at the British Insurance Brokers' Association (BIBA) Conference.

Speaker: Sheldon Mills, Executive Director, Consumers and Competition
Event: The British Insurance Brokers' Association (BIBA) Conference 2022
Delivered: 11 May 2022
Note: this is the speech as drafted and may differ from the delivered version


  • Brokers play a vital role in helping consumers and businesses access the insurance products they need, especially in times of uncertainty, safeguarding them against unexpected financial losses.
  • We want to support competition, innovation and growth in the sector – like other parts of the financial system where we are seeing innovation and disruption through technology, data-sharing, and novel business models. 
  • Our regulation takes into account the size and complexity of regulated businesses, but we are mindful of our impact on smaller firms, and we are playing close attention to the views of different stakeholders as we review our regulatory and redress framework.
  • Insurance brokers have the power to deliver social good, through helping consumers and businesses manage risks, supporting the UK’s transition to net zero, and fostering a more diverse and inclusive culture to better support customers and the sector.

I want to start by thanking you and the wider insurance broking community for the contributions you’ve made to consumers and local communities up and down the country during a time of change and uncertainty.   

As brokers, you help consumers and businesses find the right insurance products they need, enabling them to safeguard against unexpected and unaffordable financial losses. You have done that well during the pandemic and I hope you will continue to do so as we move into a time of rising cost of living and economic uncertainty for households, communities and businesses across the UK. 

You place a lot of business! Statistics show that, collectively, general insurance brokers arrange over £74 billion of insurance each year. That is 67% of all general insurance business and 81% of all commercial insurance business in the UK. The sector serves an important function through providing the economy the confidence and support it needs to thrive.  

The value you provide your customers through advice, access to suitable insurance protection and risk management, cannot be understated. This is especially the case in the current market as we see new risks emerging in different areas.  

In my speech today, I want to start with innovation and growth, followed by how you can deliver better outcomes for customers, especially in the context of the current economic climate, and some of the key risks for the sector. And finally, I will speak about ESG and D&I.   

Innovation, growth and competition

Last month, we launched the FCA’s three-year strategy. It sets out our ambitious vision for financial services across three strategic themes – reducing & preventing serious harm, setting & testing higher standards, and promoting competition and positive change. 

Turning to the last of those – promoting competition and positive change. We see innovation as key to ensuring that firms continue meeting the changing needs of consumers and businesses.   

Many parts of the financial services sector are seeing innovation and disruption through technology, data-sharing, and novel business models. Through our own Regulatory Sandbox, which allows firms to test new propositions with real consumers in a controlled environment, we have seen some great examples of innovation in insurance and in credit broking that could deliver real benefits. And much has been written about the potential of blockchain to improve the broking and claims processes which can sometimes be very complex.

Insurance brokers also have the power to deliver great social good. As we stated in our environmental, social and governance strategy published in November last year, we want to support the financial sector in driving positive change, including the transition to net zero. And we want to do so through facilitating positive market-led solutions. Brokers are particularly well-placed to advise customers on the products available to support sustainability and help them obtain green products. More on ESG later.  

It is clear to us that a culture of innovation and competition can lead to better outcomes for the users of financial services, and is vital to the UK’s standing as a world-leading financial centre. We take seriously our role in ensuring the future success of the UK’s financial services markets, and we share the Government’s aim of ensuring that the UK can compete internationally. We need to ensure the market integrity of the financial system alongside the PRA and Bank of England and their objectives on soundness and stability of the financial system. And as a conduct regulator, we support consumer protection and competition. A secondary objective of competitiveness can also help us push forward our existing efforts to ensure the financial services sector contributes to the UK economy and is competitive internationally in the long run. 

That is one of the reasons why we are supportive of the Treasury’s Future Regulatory Framework Review.   

We have already embarked on our journey to listen to different stakeholders. 

For example, we paid close attention to the views presented to the Industry and Regulators Committee at the House of Lords recently, particularly in relation to competitiveness and proportionality in commercial insurance and reinsurance regulation. These views will help inform our thinking on the work we do now.   

Fair value

The work we do is of course heavily influenced by what’s happening in the economy. Over the past couple of weeks, we are seeing pressures on households and small businesses due to the global supply chain disruption and rising cost of living.   

As the war in Ukraine drives up energy prices, inflation is at a 30-year high, and the Bank of England has warned that inflation might reach 10% within months. 

The rising cost of living is forcing consumers into difficult decisions around what they spend their money on. This may lead to them to opt out of certain types of insurance or reduce the level of cover for their existing policies. This is against a backdrop of some access challenges for insurance across certain communities. Consumers on the lowest incomes could be left significantly worse off if they are unable to access insurance that meets their needs. At the FCA, we now have a cross-sector team working on the cost of living crisis and our insurance experts will be seeking to work with the industry to deliver good outcomes to consumers and small businesses at this time. 

And this brings us to the question of value. Brokers can add value by securing appropriate cover, at the right price. But as brokers you must ensure your commission is reflective of the value that you provide to your customers, and you should not recommend a product based on your remuneration rather than the best interest of the customers.   

We do of course acknowledge that higher prices may sometimes be appropriate, for example, if the cost base is greater because there is a different level of service or the distribution process is necessarily more complicated to meet the need of the customer. 

Trust is at the heart of what you do as brokers. And we welcome the feedback from you and BIBA on our proposed new Consumer Duty. The new Consumer Duty is being proposed to ensure that firms consider the actual impact of their products and services on consumers. Many of the rules introduced for insurers and brokers over the past five years have focused on this – from the Insurance Distribution Directive, to value measures, to General Insurance Pricing and product governance rules. Following these rules means you’re well on the way to meeting our expectations under our proposed Consumer Duty.

There is still some way to go – for example, the pricing rules for home and motor insurance that came into force in January. All renewal notices must now comply with the pricing rules, and a senior manager is required to attest annually that the firm has complied with the pricing rules to help end the practice of price walking. This is the part of the speech where I give a stern message so here goes: please return your attestations urgently. 

What has been the outcome so far of our pricing practices intervention? As you would expect, we are closely monitoring prices in the market to ensure firms are complying and consumers are receiving fair value for their products. The latest data from ABI shows that there has been a 5% decrease in the average price paid for motor insurance, with a small increase in average new business prices more than offset by a larger fall in average renewal prices. We know that supply chain inflation is strong with inflation at 7%, and that we can expect this to put pressure on premiums – these might increase. However, if they do, we still expect the industry as a whole to find value for customers. You as brokers play a critical role in delivering value for customers at this time. 

Brokers also play a vital role in making sure that customers buy insurance that meets their needs, and that the benefits and exclusions are clear to them. When consumers buy insurance, they should expect that it is there for them if they need to make a valid claim.  

Covid has led to new exclusions appearing in policies – for example, many travel insurance or business interruption insurance policies now explicitly do not provide cover for certain Covid-related issues. It’s important for consumers to be absolutely clear about the scope of what they are covered for and what is excluded. 

Finally on fair value, I want to mention our work on multi-occupancy buildings insurance, in particular the rising costs faced by residential leaseholders and other affected property owners. I wrote to the Secretary of State of the Department of Levelling Up, Housing and Communities yesterday to set out our view on the potential harms which could be present in this market, and some initial options for ways we could address them. If you’re offering these products, I encourage you to read the letter and consider how you can ensure you are providing fair value to freeholders and leaseholders. 

Minimising risks

A key area of the FCA’s strategy is to minimise risk and ensure that firms are resilient financially and operationally. Customers rely on this. So, another focus of ours is oversight and control where you hold client money. 

Our rules require that firms safeguard client money and maintain adequate wind-down plans, to ensure that there is minimal disruption in the event of failure. Firm failure remains an ongoing risk, and over half of the brokers we assessed have matters requiring attention within their client money arrangements.   

I know that a significant area of concern for this industry is the cost of the Financial Services Compensation Scheme (FSCS) levy. We are alive to the issues of unpaid redress liabilities that result from failed firms from different parts of the financial services industry. What are we doing about this in our strategy? First, we are reviewing the redress framework to ensure it is appropriate and proportionate in its scope and funding. Second, we want to be more assertive in tackling harm where we see it to reduce the need to rely on FSCS in the first place.

There are two elements to this, first, our stronger authorisation gateway will prevent problematic firms from entering the market in the first place. Second, we will act earlier and more assertively to reduce and prevent harm. Over time, this work will help stabilise the pressure on the FSCS levy, and hopefully the contributions that firms are required to make.  

It is important to note, however, that this will not happen overnight. Some of the harms in the system – mis-selling, poor advice and so on – would have taken place several years ago and are working their way through the system. But our review and actions to be a more assertive regulator will start to tackle these concerns and we will adopt an open and transparent approach with the industry. 

To strengthen preparedness, we would expect brokers to buy Professional Indemnity insurance to cover the errors or omissions which could arise from your business.  

And for those of you who use an Appointed Representative, you should ensure that you have effective oversight of their activities.   

The benefits of the Appointed Representatives regime are clear. It supports a wide and vibrant industry, promotes competition, and enables access to enter and provide services. This is especially relevant for your sector as General Insurance and intermediaries has one of the highest numbers of Appointed Representatives.

However, we have seen instances of customer harm resulting from ineffective oversight of Appointed Representatives. Our data shows that principals generate 50 to 400% more complaints and supervisory cases than other directly authorised firms. During our Thematic review in 2016, we found that over half of the principal firms in the sample could not consistently demonstrate that they had effective risk management and control frameworks to identify and manage the risks arising from their appointed representatives’ activities. We also found examples of potential mis-selling and customer detriment as a result of appointed representatives’ actions at a third of the principal firms included in the review, with most of these issues not previously identified by the principal. 

So if you use Appointed Representatives in your business model, we expect you to have good oversight of them, to ensure that they are following our rules on product suitability and value.   

We have recently set up a new department to oversee the Appointed Representative regime and will be supervising these firms more closely to deliver better outcomes. 

Proportionality and pace 

Moving on to what we as a regulator have been doing to drive better outcomes. We know that a concern the industry has is the proportionality and cost of regulation. We know you are also concerned about the pace to which we deliver some of our services to you, for example, authorisations and changes in your permissions or senior manager functions. 

Earlier on I mentioned the Treasury’s Review. The government has an understandable aim of supporting competitiveness and sustainable economic growth in the UK, which is an aim we share. 

Some of you may think that regulators have a 'one size fits all’ approach. But it will not surprise you that we, like other organisations, have finite resources. And that means we need to be very clear about what we prioritise and why. This is particularly the case for us due to our broad and growing remit across different areas of financial services.   

We are mindful of our impact on smaller firms, including the many firms in the insurance broking sector. As you might expect, we spend more time regulating larger firms. And a lot of our requirements, including our Senior Managers and Certification Regime, take into account the size and complexity of regulated businesses. 

We have an opportunity under the Future Regulatory Framework to tailor rules to better address the issues that are specific to the UK market. We are already doing so, for example, as part of the Investment Firms Prudential Regime, we delivered rules to streamline and simplify prudential requirements for solo-regulated UK firms authorised under the Markets in Financial Instruments Directive. And we will look at whether there are other sectors or rules we can change to adapt to the evolving needs of the UK market while ensuring we maintain coherence and certainty for the regulatory framework.   

In the insurance sector, during the pandemic, we demonstrated that we could think and do things differently and at speed. We initiated the test case to establish certainty of cover for many of your customers who held Business Interruption Insurance – as at March 2022 over £1.3bn had been paid out to claimants directly as a result of the Supreme Court ruling.   

Our Strategy sets out how we will be tougher on our own performance, and measures to enable us to be held to account. This new approach will make us more agile and help us adapt more quickly to market needs and emerging challenges. 

While we are determined to make our authorisation gateway stronger, we are working hard to bring down our timescales for considering applications. We have recruited 95 additional permanent colleagues in our Authorisations Division and we will be more assertive in our approval decisions. Our transformation work is underway to improve processes and efficiency within Authorisations. 

And we are committed to creating an environment conducive to innovation and growth. I mentioned our Regulatory Sandbox earlier. A study shows that entry into our sandbox is associated with a higher probability of raising funding and an increase of about 15% in the average level of funding.

Another example is our Early and High Growth Oversight function. We are expanding it to provide closer support for 300 newly authorised businesses, to help them understand their obligations as they grow.   

ESG and Culture 

Finally, under the umbrella of ESG I want to talk briefly about two important topics: diversity and inclusion, and our work on sustainability and climate change.  

A diverse and inclusive industry, which attracts and develops the best talent, will drive positive culture in firms. For example, studies have shown firms with higher gender diversity in their boardrooms incur fewer fines for misconduct and have better risk management. I am black, Welsh and a gay man, but I am not interested in diversity because of that identity. On the contrary, as a regulator, I am interested in diversity because efforts to improve your firms’ diversity and culture will certainly help deliver better outcomes for customers and prevent future financial crises. It will also support the UK financial services industry to continue to be a global leader. We want to see strong leadership and committed actions from firms to drive meaningful progress. It is important that firms build an inclusive culture, where individuals feel able to express their views, speak up and raise concerns.  

Last year’s Hampton-Alexander review found women still only hold 14% of executive directorships in the FTSE 100. In addition to this, the 2020 Parker review quoted 37% of FTSE 100 companies surveyed did not have any ethnic minority representation on their boards. In financial services, we have a huge role to play in increasing diverse representation.  

We have been active in this space: we recently published our Policy Statement on the D&I on company boards of listed companies and plan to issue a consultation in the autumn following our D&I Discussion Paper published last year. I ask you to consider initiatives for improving both your firm’s diverse representation and ensuring your workplaces are psychologically safe and inclusive. We will ensure that our work here is proportionate and targeted – larger firms will have greater expectations on them than smaller ones. But ultimately, we will all benefit from our efforts in this space. 

Moving on to climate change, we launched our ESG strategy at COP26 last year and we have recently received our remit letter from the Chancellor, which sets out the Government’s ambitions to achieve net zero by 2050 and places expectations on us to factor this into our regulatory work programmes. In our ESG strategy, we set out five themes that we will work on: promoting transparency, building trust, utilising our full range of tools, supporting the UK’s transition to net zero, and building our team and capabilities.  

As part of the strategy, we also introduced disclosure rules for premium listed issuers, asset managers, life insurers and FCA-regulated pension providers.   

I co-chair the disclosures workstream of the IOSCO Sustainable Taskforce. Our work has helped to support the formation of an international standard setting body, which will produce climate disclosure standards. There are material risks to the climate and to society. These risks pose challenges for corporates and small businesses on value, risk management and governance. This is something your industry should watch closely. You need to understand these risks to ensure you can provide the long-term cover and support for clients need.  

For consumers and small businesses, we are also seeing major impacts in the UK from climate risks, for example, the damage caused by floods. It is important that we meet the challenge of decarbonisation, including supporting changes to the way we consume and live, construct and upgrade our homes and offices – residential and commercial property are large contributors to Scope 3 emissions. This will bring complex challenges for insurers and brokers to support society’s needs; you will need to help manage and underwrite that risk. As a regulator, we will be seeking to understand from insurers and brokers how you are managing these ESG related risks. 


Brokers play a vital and important role in the insurance sector and the UK economy. You are on the front line in understanding the needs of consumers and businesses, and serving them in the challenging times we find ourselves in. We look forward to continue working with you to deliver better outcomes.