FCA Strategy and Consumer Duty Update

The long awaited FCA Strategy 2025-2030 is now out, and hot on its heels follows an update on Consumer Duty and next steps. There are several changes from the outline strategy announced by the FCA, in terms of priority and focus.

• Be a smarter regulator by being predictable, purposeful and proportionate. The FCA will improve its processes and embrace technology to become more efficient and effective

• Support sustained economic growth by enabling investment, innovation and ensuring the continued competitiveness of the UK’s world-leading financial services

• Help consumers navigate their financial lives  by working with industry to boost trust, product innovation and ensuring the right information and support is available for people to take financial decisions

• Fight financial crime by focusing on those who seek to use the fact they are regulated to do harm. It will go further to disrupt criminals and support firms to be an effective line of defence

 

By contrast, the previous announcement set out: 

1. Becoming a more efficient and effective regulator
2. Tackling financial crime
3. Building consumer resilience
4. Supporting economic growth and innovation

 

Over the last quarter the economic growth agenda has been increasingly highlighted, and this is now playing out in the adjustments we have seen announced.

The FCA have published a 20 page slide deck to support their announcement, with a central element being the rebalancing of risk.

The FCA’s new vision of “Deepening trust, rebalancing risk, supporting growth, improving lives” sits at the heart of what seems to be the new focus areas.

 

So how does the regulator plan to achieve their goals? 

Be a smarter regulator:

1. A smaller number of priorities
2. A more flexible approach in large firms
3. More firms to have direct access to the regulator
4. Predictable focus areas
5. Smaller number of publications
6. Investment in technology
7. Streamlined enforcement
8. Proportionate and easier to engage with

 

Rebalancing risk

1. Regulation should focus on enabling informed risk to be taken not eliminating it entirely
2. Regulatory Risk: Encourage innovation and competition by allowing more firms into the UK market by potentially placing a hold on raising standards for new entrants
3. Firm and Market Risk: Mitigate excessive risk, balanced against the need to ensure firms have the space to try new things and for markets to evolve
4. Consumer Risk: Allow consumers to take more risks to benefit the majority, even if a small minority do not get what they hoped for

 

Changing how the FCA operate

Open – Clearly explaining what we are doing and why, and being transparent and predictable in our decision-making. This will deepen trust in our work and enable Parliament and others to hold us to account.

Curious and forward thinking – Seizing on the opportunities from new developments to innovate and make us and our markets work better, for the good of consumers and the economy.

Collaborative – Forging productive links with Government, industry, consumer groups, international partners, other regulators and law enforcement agencies to help people navigate their financial lives, fight crime and support growth.

Resourceful – Asking for no more than we need and continually improving how we operate to do more, faster.

The full publication can be found here

 

Consumer Duty Next Steps:

Hot on the heels of the 2025-2030 strategy release, the FCA have published their feedback statement FS25/2, “Immediate areas for action and further plans for reviewing FCA requirements following introduction of the Consumer Duty”

 

Key takeaways of how this announcement effects the insurance sector are as follows:

International Business (Overseas customers insured from the UK)

• UK-based firms providing products or services to customers based outside the UK are, in many cases, required to apply FCA regulation
• The FCA will examine whether conduct rules, like requirements under the Duty, should apply to firms serving customers outside the UK, while adhering to international obligations

 

Consumer Duty Scope

• Currently all firms below the criteria for “large risks” are in scope of The Duty
• The FCA will shortly consult on proposed changes to the definition currently used in the insurance sector to determine which SME customers need protecting under the rules applying to retail customers
• Planned consultation by Summer 2025

 

Reducing the regulatory burden – additional consultations and actions

• Allowing firms greater flexibility over how often they review product value under the product governance rules
• Removing the specified minimum hours of training and development required for insurance employees
• Reviewing some of the more detailed and prescriptive product-specific rules in the Insurance Conduct of Business Sourcebook, including those for packaged bank accounts and GAP insurance
• We will review the reporting requirements that were introduced under our general insurance pricing practices intervention.
• We will engage with stakeholders about providing more clarity on how the rules on product governance and fair value in the Duty interact with each other and those elsewhere in the Handbook.
• Clarifying the application of the Duty through distribution chains: This includes, for example, how firms should share information within the chain, and how the Duty applies proportionately to firms with a more indirect role
• Addressing outdated references to Principles 6 and 7, along with the Treating Customers Fairly initiative (where Consumer Duty applies)
• Improved guidance for smaller firms
• Improved FCA handbook functionality and a clean up of rules

 

Overall, the FCA have committed to “an ambitious workplan”:

Reviewing The Foundations: Addressing how we regulate and the scope of our rules, considering how they apply to customers based outside the UK and reviewing some core definitions.

Future-Proofing Disclosure: Allowing more flexibility to tailor customer-facing communications in a way which promotes consumer understanding and allows for more modern customer journeys.

Reducing The Administrative Burden: Giving firms more flexibility in how they apply our requirements, so that our regime is more outcomes-focused, reducing unnecessary administrative burdens.

Streamlining Requirements: Targeted work to remove or review outdated requirements, or areas of unnecessary complexity.

The full publication can be found here

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