Insurance in the round: Innovation, growth and trust

Introduction

It’s hard to think of a more symbolic venue to discuss driving change in the insurance sector than the QEII Centre.

Step outside, and you’re in the shadow of both the Houses of Parliament, and Westminster Abbey. Scrutiny, change and serving citizens on one side. Tradition on the other.

That’s where insurance sits, too.

As an industry, you have to balance the new with the non-negotiables – finding ways to innovate while ensuring outcomes and trust keep pace. Throughout history, you’ve done exactly that.

The UK Customer Satisfaction Index shows you understand and care for your consumers.

That, alongside your ability to spot a need and build a market around it, is what makes our insurance markets world-leading.

In our ever-changing world, insurance is critical. It shields millions of consumers from losses that could make them financially vulnerable. Underpins resilience for businesses. Drives growth through effective risk management. And is central to a resilient UK economy.

Insurance attracts huge amounts of investment from across the globe and makes up nearly one-quarter of total financial services exports. 

Which is why we don’t just want you to succeed. We need you to succeed.

But for markets to continue to grow, firms must feel confident enough to explore new ways to unleash innovation.

We’re here to support you

Tools like our AI lab[2], Sandboxes[3] and new Scale-up Unit[4] are there to support you as you innovate. I encourage you to use them, and use them early – especially our Sandboxes.

They offer a safe environment to test new products and ideas to find out what does or doesn’t work.

It’s striking that of the nearly 3,000 firms that have applied across our Innovation Pathways and Sandboxes, just 208 were insurance-related. We’d like to see this number increase.

Because when you do apply, you are more successful than other sectors: overall acceptance rates across all sectors are around 31%. For insurance firms, it’s 50%.

We’ve seen some creative, impactful Sandbox work coming from insurance.

For example, a firm developed a new business model for bike insurance. It charged monthly, based on the exact cost of all claims settled by the pool of consumers, but capped premiums so bills would always be predictable. We helped them design a testing plan with appropriate safeguards in the Regulatory Sandbox – and today, they’re delivering the plan on a greater scale.

We know it’s tough to innovate in this space.

But it’s not impossible.

The door is open. You just have to walk through it.

Bring consumers with you

The market is at its best when innovation is something consumers feel – not just something firms build.

It’s not enough to create and scale a good product.

To succeed, you have to bring consumers with you when you walk through the door to innovation.

But don’t just assume they’ll come along.

Our 2024 Financial Lives Survey[5] found that 66% of consumers have low trust in the sector, making insurance one of the least trusted parts of retail financial services. 

That’s not easy to hear, I know. But rather than a rebuke, let’s take that as motivation. To work together. Improve those numbers. And build greater trust. Because if insurance underpins resilience, trust underpins insurance.

It won’t be easy, but it is possible to build that trust by improving the consumer experience.

How? Be clear about coverage and test consumer understanding. Handle claims promptly, fairly and transparently. Test outcomes against the Consumer Duty.

Since the Duty took effect, we have seen higher industry standards and tangible consumer benefits.

And we are acting where firms don’t meet our expectations.

We recently stopped one insurer offering unsuitable products to 30,000 consumers – resulting in £1m paid in compensation.

When consumers were being shortchanged after their car was stolen or written off, we secured £200m in compensation for 270,000 consumers[6].

Our action on Guaranteed Asset Protection insurance will save consumers an estimated £70m[7].

Looking ahead for consumers

Our focus on seeing good consumer outcomes will continue throughout 2026.

In the last few years, we have looked closely at the retail insurance sector. We have used our competition market study tools to analyse how the pure protection market is working, as well as premium finance. And reviewed the motor, home and travel insurance markets.

There is room for improvement.

But there are also examples of the market working well. And changes being made to better support consumers because of the Consumer Duty.

We do not believe we need any new market-wide interventions to drive positive progress. We will achieve our aim, of good consumer outcomes and innovative markets, through the Duty.

For example, we recently acted to ensure consumers paying for insurance monthly get fair value from their provider[8]. Many of the firms we looked at were delivering it. But some were not. 

Rather than write new regulation, we used the Duty’s fair value rules to get better outcomes for consumers, faster. I’m pleased to report that alongside base rate reductions and firms’ own fair value assessments, this has helped save consumers £157m annually.

There is more to come.

This year, we will complete our work on motor total loss and home and travel to better support consumers. And we will see that firms make the necessary improvements. 

Because trust is built or lost at the point of claim.

Following the Which? super complaint, we will continue our work improving claims handling and consumer understanding of what they’re buying.

We’ll also expand our review of firms’ oversight to outsourced claims processes. This is in addition to our focus on Managing General Agents.

Finally, we will review products and services for indicators of poor outcomes. And look at how firms treat vulnerable consumers.

But we’re not just looking backwards. We’re looking forwards, too.

Too many people still lack protection for when things go wrong – 26% have no insurance at all[9]. Leaving millions exposed when life hits hardest.

We should all be working to increase access to insurance. 

Our Pure Protection Market Study[10] shows the market mostly works well. We see firms delivering good value for consumers. Most can claim successfully, with 98% accepted and £5.4 billion paid out in 2024. 

Still, 58% of adults don’t hold a pure protection product, even though many would benefit from one. 

That’s a significant protection gap. One that we will work with you and other stakeholders to close.

There is more to come before we conclude our work in this area: 

• assessments of income protection claims ratios,
• incentives to churn consumers, and 
• claims experience

Our final report will be published later this year.

We welcome your engagement with the Financial Inclusion Strategy[11] and the Government’s Motor Insurance Taskforce Report[12]. And are committed to playing our part in that work.

Looking ahead for wholesale markets

While our focus on the Consumer Duty remains to drive better consumer outcomes, we also want to enable our wholesale markets to thrive.

These are markets defined by customisation, where specialised risk-taking is enabled. Keith Richards’ hands. David Beckham’s legs. Bruce Springsteen’s voice. A sommelier’s sense of smell and taste. 

That calls for special protections. And proportionality and clarity. 

We have listened carefully to your feedback around the application of the Duty for wholesale firms. And have already acted to remove some disproportionate burdens in your sector.

We are consulting on removing unnecessary data returns, and want to consult on the disapplication of the Duty to overseas consumers in Q2. We’ve already received valuable feedback on this and will keep the conversation going in roundtables.

Some want us to move even faster. But we know it isn’t sensible to tweak insurance rules without considering how they interact with the Duty.

Which is why we will be consulting on them together. To provide clarity on how the future framework applies.

More broadly, we’re committed to re-setting expectations around the application of the Consumer Duty to wholesale markets.

The Duty doesn’t apply to purely wholesale activity. Only if firms have a material impact on retail consumers.

Some firms have misunderstood this. Others have had to spend too much time clarifying how it does not apply, and need to know when enough is enough. We also know applying the Duty across distribution chains can be complex.

So, we are taking action.

We have already set out a four-point plan for our work to the Chancellor. Clarified expectations for firms working together. And announced plans to draw clearer lines between retail and professional investors.

In the first half of 2026, we will consult on changes to the Duty’s scope and application to reduce duplication and keep requirements lean, and outline our approach to removing businesses with non-UK consumers from its scope.

We will also review how our wider conduct expectations for insurers apply internationally.

The FCA’s role

The FCA is here to support the success and integrity of the entire market.

The consumers, who need access to products that will help them navigate their financial lives. And firms, as they grow and innovate.

But a prescriptive one-size-fits-all approach does not support markets to innovate and change.

So, we are taking an increasingly outcomes-focused approach to regulation. And overhauling our supervisory model.

Supervision is there for a reason. It allows us to act before harm becomes systemic, and deliver better outcomes for consumers and markets more quickly than we would through enforcement.

There is still room for us to work more smartly. With a more predictable, purposeful and proportionate approach.

Engagement will change.

We want to increase the number of firms we are in direct contact with and scale the intensity of our ongoing supervision depending on risk. Less intensive supervision for those doing the right thing. Stronger action where harm is highest. 

To minimise burden, we will ask only for data we need. And use new technology to manage and analyse it.

It is important that I state that we do need data – the right data, at the right time, helps us spot harm and act early.

Importantly, our supervisory priorities will be more predictable.

We have stopped publishing our routine 'Dear CEO' portfolio letters and moved to new annual market reports that will outline our regulatory priorities predictably and consistently.

These have been piloted in just one sector: yours. A clear sign of how important the insurance market is.

We are testing this approach with firms, our panels and trade associations so we can take feedback.

But keep in mind that we often get different and conflicting views. Some of you want more detail. Others, less. We can’t promise to satisfy everyone – but we can promise to listen and consider every view.

Finally, I’ve said before that risk is essential to growth and innovation. Rebalancing it is at the heart of our five-year strategy[13]. 

We want to support responsible, managed risk, enabled by outcomes-based regulation. After all, you are the risk experts – and central to helping others manage theirs. 

And we know markets are changing – that a prescriptive approach does not support consumers or markets to evolve.

Which is why we want those of you in firms to be confident to change your approach, if you can deliver better while maintaining regulatory standards.

We recognise that myths about perceived regulatory blocks – or what FCA supervisors might say – put many off changing tack. 

Those myths hinder progress.

That’s why, in my Chief Risk Officer speech last autumn, I asked firms to help us bust them. To empower their second and third lines to adapt where it supports sensible, managed risk.

And it’s why I’m encouraging you now to be confident to change course where it delivers well for consumers.

Finally, if you have any feedback on our supervisory model, now is the time to share it. We are listening.

Conclusion

So as you move throughout the conference today, remember the setting – Parliament on one side, Westminster Abbey on the other.

Bring about change. Keep sight of tradition. That is the message. 

We want you to succeed. But we need you to be confident to innovate, and bring your consumers with you.

So, here’s my ask: engage with us. Early and often. 

And here’s my promise: We will be clear about our priorities, and on hand with the practical support you need to innovate with confidence.