Source: Deloitte ECRS analysis

Furthermore, the UK’s Financial Conduct Authority (FCA) is advancing proposals to review its consumer protection framework, particularly the scope of the Consumer Duty (“the Duty”). The FCA intends to establish a clearer distinction between conduct rules applying to commercial versus retail customers. This is evident in its recent Handbook changes to simplify insurance rules including:

  • New definitions of “larger commercial customer” and “specialist risks contracts” allowing firms to exclude larger small and medium sized enterprises from the full scope the Duty.

  • A review of requirements in relation to co-manufacturing arrangements.

In addition, the FCA will consult on developing a definition of “retail customer” (to assist firms by drawing a clearer line between commercial and retail consumers) and removing non-UK consumers from the Duty’s scope. This means that wholesale insurers will have to wait until well into the year for a clearer picture of the full extent of regulatory simplification. 

These changes, once finalised, could lead to a more proportionate approach to conduct risk within the commercial insurance sector in the UK. However, to benefit fully, firms will likely need to reassess their current business models, data collection practices and product and target market definitions. Firms will have to evaluate the costs and benefits carefully to justify investment to leverage new possibilities offered by regulatory change, while allowing flexibility in their approach as the impact of new initiatives becomes clearer through 2026.

 

Navigating the storm: scaling up while staying compliant in personal lines

Significant market pressures on personal lines may accelerate consolidation in the GI market 

In the last three years the UK personal lines insurance sector has come under intense FCA scrutiny driven by conduct regulatory reform such as the Duty and pricing practices rules. This, alongside increased claims inflation in 2022 and 2023, has put material pressure on margins in the motor industry, as highlighted by the UK’s Motor Insurance Taskforce.1

This environment has led to significant market consolidation and transformation which are still playing out. We note a similar trend in the EU,2 where competition is intensifying, yet average motor insurance prices are still rising, and getting closer to UK levels3 (e.g., in France and Germany). These pressures may lead to similar consolidation trends in continental Europe, although they will translate differently4 across Member States depending on each market’s characteristics and differences in areas of supervisory focus (e.g., around implementation of the Insurance Distribution Directive).5,6

We believe it is likely that there will be further consolidation in the retail GI market in 2026. Insurers should keep customer outcomes and consumer protection hot spots (see below) front of mind when selecting consolidation targets and migrating customer portfolios. 

The ebb and flow of consumer protection hot spots in GI

The UK remains a frontrunner on retail conduct issues, and areas of supervisory focus in the UK can signal future trends in EU Member States. Aligned to the growth and simplification agenda, the FCA has signalled its intent to move towards a less intrusive supervisory approach for those firms that can “demonstrably show they are seeking to do the right thing for customers” and to focus on areas of “greater harm.”7 The FCA and UK Government have also eased the pressure on UK insurers around differentiated pricing8 and motor insurance pricing9 by confirming that most of the price differentials can be justified on the basis of risk. 

Meanwhile in the EU, insurers are gradually incorporating conduct risk into their business as usual approaches (for example in France10 and Ireland). The European Insurance and Occupational Pensions Authority will focus on the distribution of insurance products through digital channels this year, whilst some EU supervisors are progressively raising the bar on customer outcomes.11

However, there are still areas of concern with the UK press and consumer groups continuing to highlight areas of poor customer outcomes, such as in claims handling in the home and travel sectors. Following the Which? super complaint in late September 2025, the FCA announced that it will conduct reviews of claims handling, servicing and consumer understanding during 2026.12,13

If insurers have not done so already, they should identify and rectify the root cause of harm in claims handling processes. To do this, firms need to consider how they are monitoring outcomes in claims, the metrics being used, and the systems and controls involved as well as whether product design, target market definition and poor consumer understanding of product coverage could be exacerbating poor outcomes. For example, the FCA found that storm claims have a much greater rate of rejection than most other GI products. As storms are likely to become increasingly severe and frequent,14 this is a red flag that requires firms to act to reduce foreseeable harm. In conclusion, we expect firms will have to carry out significant work in this area this year. Firms should leverage insights gained from home and travel claims’ reviews to ensure consistently good claims handling outcomes across their entire personal lines portfolio. 

The FCA’s much-anticipated Premium Finance Market Study report has been delayed to Q1 2026. The final report will likely focus on higher-priced premium finance products (annual percentage rates (APRs) close to 30% had been flagged as likely excessive) and their impact on customers with vulnerable characteristics. We expect firms will have to conduct a detailed review of their pricing structures, and the impact on groups of customers identified as vulnerable. Premium finance products with high APRs compared to the rest of the market that are not explained by higher risks will require rigorous scrutiny from a fair value perspective. This means that this year we are likely to see change in the motor insurance market as firms move to meet the FCA’s expectations in this area.

We believe firms must adopt a proactive, risk-based approach to compliance to navigate the ebb and flow of consumer protection hotspots in the sector. This means establishing systems that can promptly “sound the alarm” when customer outcomes deteriorate, helping to identify specific customer cohorts at risk.

We are of the view that insurers with best-in-class claims data management, retail conduct management information, and operations, will be strongly positioned to explore acquisitions in a consolidating market. For those pursuing growth through acquisitions, avoiding deterioration of customer servicing during migration processes and thoroughly understanding the risks of newly acquired portfolios will be paramount. 

 

Risk management in focus: preparing for DyGIST and future GI challenges

Above and beyond the growth opportunities emerging from regulatory simplification, the most significant opportunities in the GI sector stem from increasing demand for protection. This is driven by an environment shaped by economic volatility, geopolitical tensions, and escalating climate risks. Insurers are rising to this challenge, evidenced by the growing levels of cyber insurance and P&C premiums, which are expanding at a rate exceeding overall economic growth globally but where increasing competition is also creating downward pricing pressures. 

A crucial driver of this expansion is the rise of specialised insurance carriers and distributors, particularly managing general agents (MGAs). With over 300 MGAs now operating in the UK – a remarkable 60% growth since 2019 – these entities are reshaping the market.15 The EU market has also seen significant growth, with most of the MGAs being domiciled in Benelux, Germany and Italy.16,17

Under the MGA model, traditional insurance carriers provide capital and delegate key functions such as pricing and underwriting to specialised MGAs. This allows the carrier to enter new markets without having to build deep expertise and to take advantage of the more nimble nature of MGAs to operate their business. 

The growth in specific lines of business alongside the rise in delegated underwriting result in unique complexities that attract regulatory attention such as the need for oversight and controls over MGAs and dealing with conflicts of interest between carrier and MGA when selecting risks. Governance over risk selection, robust on-boarding processes of new delegated authorities and ongoing oversight of their activities are key for capitalising on this growth successfully. 

It is against this background that, in the UK, the PRA will conduct its first DyGIST in May 2026 involving a live simulation of three different stress events over three weeks. 

We see a direct link between the DyGIST and an insurer’s ability to price and manage risks accurately and promptly and grow the business safely, underpinned by high quality, reliable data and good oversight and understanding of the models it relies on. The DyGIST will test these risk management capabilities, potentially highlighting areas for improvement and paving the way for the PRA to elevate its expectations and introduce new requirements. 

Therefore, firms must assess their current risk management maturity across all lines of business. Early preparation for this exercise and the identification of potential weaknesses will be crucial. Addressing these areas ahead of time will pre-empt significant challenges later in the year, safeguarding a firm’s ability to pursue growth effectively in key business lines.