FCA urges insurance innovation and trust for consumer outcomes
Sarah Pritchard, FCA deputy chief executive, highlighted the critical role of innovation and consumer trust for the UK insurance sector's growth. Speaking at the ABI Annual Conference, she outlined the FCA's support for firms and its continued focus on consumer outcomes and flourishing wholesale markets.
Unleashing innovation with FCA support
FCA Deputy Chief Executive Sarah Pritchard highlighted the central role of innovation for the UK insurance sector's continued success and growth.
She encouraged firms to utilize FCA tools such as the AI lab, Sandboxes, and the new Scale-up Unit to test new products and ideas in a safe environment.
Despite the availability of these resources, only 208 out of nearly 3,000 firms applying to Innovation Pathways and Sandboxes were insurance-related.
However, insurance firms show a higher success rate, with 50 percent acceptance compared to the overall 31 percent.
Pritchard cited a successful Sandbox case where a firm developed a capped-premium bike insurance model, which is now being scaled up.
The FCA aims to increase engagement from the insurance sector, emphasizing that the door to innovation is open for firms willing to engage early.
Rebuilding trust through Consumer Duty
Consumer trust in the insurance sector is low, with 66 percent of consumers expressing distrust, making it one of the least trusted retail financial services.
Pritchard stressed that rebuilding this trust is vital for industry resilience, achievable through improved consumer experience and strict adherence to the Consumer Duty.
Since its implementation, the Duty has driven higher industry standards and tangible consumer benefits.
The FCA has taken action against firms not meeting expectations, stopping an insurer from offering unsuitable products to 30,000 consumers, leading to £1 million in compensation.
The FCA's focus on good consumer outcomes will continue throughout 2026, with further work on motor total loss, home, and travel insurance.
A crucial balancing act
The FCA's dual focus on innovation and consumer trust presents a critical challenge for the insurance sector.
While regulatory tools are available, low firm engagement suggests a hurdle in translating support into widespread change.
Success hinges on firms proactively embracing the Consumer Duty and leveraging FCA resources to genuinely enhance market integrity.