On 24 February 2026 the FCA published the first of its newly introduced annual Regulatory Priorities reports, focusing on the insurance sector. The FCA intends for the reports, which replace portfolio letters, to communicate its priorities more clearly and consistently.
The FCA’s key areas of insurance focus this year are:
improving consumer understanding, claims handling and service quality
increasing access to insurance
supporting growth and innovation
simplifying regulation.
The report announces a number of new initiatives taking place over the year. Boards should review the report and take action where necessary.
In this article
What does this mean?
A shift in FCA communications
The publication of industry-specific reports marks a change in the FCA's communication with firms. The reports consolidate supervisory and policy activity into a single set of expectations for boards, in line with the FCA's "smarter regulator” agenda.
The FCA again highlight its “expanding dedicated supervisory contacts” for firms and “less intensive attention on firms doing the right thing”. Both were referenced in its 2025-30 strategy and link to the “overhauling” of its supervisory model, announced by Deputy CEO Sarah Pritchard earlier this month.
Firms will note the new priorities report is more digestible than previous portfolio letters. It also strikes a more collaborative and growth-focused tone. Because it covers insurance as a whole, it may feel higher-level than the previous sub-sector portfolio letters.
Improving consumer understanding, claims handling and service quality
The FCA is clear many consumers still face poor experiences when making claims, so claims handling, distribution/sales processes and consumer understanding remain top of the regulatory agenda. This priority is closely linked to the Consumer Duty and to outcomes at the point of claim. Firms can expect focus on clear communications, prompt and fair claims responses, and monitoring that products deliver as promised.
Following the Which? super-complaint, the FCA will continue supervisory and enforcement investigations into home and travel claims handling. Accordingly, it will broaden its review of oversight where claims processes are outsourced or sit under delegated authority models, including remuneration arrangements. The FCA will also analyse how sales processes affect outcomes and continue to focus on consumer understanding, through its previously announced actions in its Which? super complaint response.
The FCA will also start consulting on how it reflects the Digital Markets, Competition and Consumers Act 2024 (DMCCA) in the Handbook.
Increasing access to insurance
The FCA positions access to insurance as central to consumer resilience, highlighting that vulnerable groups can lack cover. The FCA will work with trade bodies, insurers and consumer groups to increase contents insurance uptake for social renters, and independently review travel underwriting decisions affecting consumers with pre-existing mental health conditions.
Premium finance, following the recently released final market study report, remains an area of attention. While the FCA notes cost reductions since 2022, it will continue to monitor APRs and act where fair value concerns persist. The regulator also intends to conclude its pure protection market study later in 2026, with an emphasis on closing the “protection gap” and improving awareness and claims experiences.
Supporting growth and innovation
The FCA underscores its commitment to support growth and innovation.
The regulator confirms its support for firms’ use of AI, but emphasises that they must closely monitor customer outcomes. It announced it will assess how firms use AI in their internal processes (underwriting, claims and consumer services) during this quarter. The FCA also encourages use of its sandbox and AI Lab. It will publish an evaluation report from its AI Live Testing initiative by year-end.
The FCA emphasises collaboration with industry. There is a clear desire from the regulator for industry to develop new products covering emerging risks, ensuring the sector remains relevant and resilient.
Simplifying regulation
The FCA underlines prior commitments to simplifying regulation. Chief to this is its December 2025 policy statement (PS25/21) and the rule and data return rationalisation it announced. This includes consultations on removing product-specific rules, conflicts rules and certain pricing practices returns, and a review of value measures implementation. It will also consult on disapplying the Consumer Duty to non-UK businesses and review the international scope of ICOBS and PROD 4.4.
What do firms need to do?
Help shape the regulatory agenda through FCA engagement.
Map out AI capabilities to engage effectively with the FCA.
Focus on improvements to claims and service customer outcomes.
The tone of the FCA’s insurance priorities report is notably more collaborative, with a clearer commitment to working alongside industry to support growth, close structural gaps and improve consumer outcomes. Firms should lean into this shift. Proactive engagement - sharing insight, evidence and practical constraints - will help shape workable supervisory and policy approaches. This is particularly relevant in areas such as closing the protection gap and as the FCA continues to evolve its supervisory model.
Of the four priorities, firms should expect the greatest supervisory scrutiny on consumer understanding, claims handling and service quality. The Which? super-complaint and the FCA’s continued focus on home and travel claims handling reinforce that claims experience remains a regulatory touchpoint. Firms should review governance, MI and oversight arrangements -particularly where services are outsourced or delivered under delegated authority models - to ensure customer outcomes are equivalent to in-house provision. Storm claims, cash settlements and fair value assessments will remain areas of attention. More broadly, firms should be able to evidence that products and services deliver on what has been promised, in line with Consumer Duty expectations.
The FCA is signalling clear support for innovation and the use of AI, including through its AI Lab. Firms should take advantage of this supportive stance by conducting a structured stocktake of their AI capabilities, governance frameworks and priority use cases. In doing so, firms should embed Consumer Duty considerations from the outset - clearly defining the customer outcomes each AI use case is intended to deliver, evidencing fair value, monitoring for bias or unintended exclusion, and ensuring appropriate governance and oversight. Firms that can demonstrate robust effective controls, rigorous testing and clear accountability will be better positioned to meet supervisory expectations and engage constructively with the FCA’s review of AI use.
Next steps
Expect FCA activity to progress through 2026, including work on sales processes and consumer understanding, the pure protection market study final report (Q3 2026), and rule simplification consultations (H1 2026). The captive regime framework is expected to develop in 2026, with introduction signposted for 2027.
Follow us
