Nearly half of brokers consider the regulatory environment in the UK insurance market ‘too restrictive’

Nearly half (44%) of the UK general insurance (UKGI) brokers polled by Insurance Times between October and December 2024 believe that the current regulatory environment for the country’s insurance market is too restrictive, making it ”difficult to balance” compliance ”against the needs for running a business”.

This is according to findings within the Five Star Rating Report: Commercial Lines and Personal Lines 2024/25, published exclusively by Insurance Times in March 2025 – this supplement, now in its 19th year, is available for subscribers via online microsites and a print publication.

The survey underpinning 2025’s edition polled around 850 UKGI brokers.

The issue of regulation was a big talking point among survey respondents – although 44% viewed the FCA’s oversight as too restrictive, a further 49% felt it was balanced, while only 7% sat on the fence or held a different opinion.

Conversations around regulation will no doubt continue throughout 2025 following chancellor of the exchequer Rachel Reeves’ broad deregulation plans, targeted at sectors including insurance and reinsurance.

On 14 November 2024, in a speech regarding her economic growth strategy delivered at Mansion House, Reeves said: “We are setting out the five priority growth opportunities on which that strategy will focus – fintech, sustainable finance, asset management and wholesale services, insurance and reinsurance and capital markets.”

Likewise, Prudential Regulation Authority (PRA) chief executive Sam Woods confirmed similar plans to relax “overcooked” regulations, proposing plans to make it easier for the insurance sector to invest in riskier assets thanks to less burdensome approval mechanisms.

On 8 January 2025, Woods told the House of Lords Financial Services Regulation Committee: “We’ve already cut reporting on the insurance side by a third. We do want to look at what scope there is to reduce the reporting burden on the banks. And that’s something, again, we’ll come forward on this year.”

Small firms hit the hardest

Financial services regulation has proven to be more than just an administrative time sink, with research from business management consultancy London Economics, published in trade body Biba’s 2023 manifesto in January that year, suggesting that UK firms face regulatory costs that are twice as high compared with other regions.

The manifesto cited stats demonstrating that average direct regulatory costs for UK brokers had increased by 40% since 2019.

Smaller firms without dedicated compliance teams find current regulations from the FCA the most restrictive, according to Insurance Times’ broker responses.

In fact, small, independent brokers – defined by Insurance Times’ research as firms with a turnover of less than £10m a year – rated today’s regulatory environment as too restrictive. This is 13 percentage points higher compared with large brokers that maintain this view.

More than half (52%) of brokers at small firms rated the UK’s regulatory environment as too restrictive, 45% stated that the FCA was balanced and 3% remained neutral.

In comparison, brokers at large firms were less concerned about regulation constrictions. Around a third (39%) of these brokers thought regulation was too restrictive, versus 52% who described it as balanced and 9% that held an alternative opinion.

Branko Bjelobaba, principal at compliance consultancy Branko, believes small firms do not have the capacity to handle the current regulations from the FCA.

He told Insurance Times: “In our world, you’ve got some very small brokers – five [or] six people and some are just one or two people. How do they manage? They’re there to look after local requirements and they’re drowning in all this FCA [regulation], which changes all the time.

“Large firms have people that are paid to do just [compliance], that’s their job. They’ve got brains, they’ve got budgets, they can use external consultants. But for the smaller [firms], the FCA should have a really serious think.”

Exactly half (50%) of UKGI’s smallest brokers, with an estimated turnover between £0 and £5m per year, stated that the regulatory environment was too restrictive in the UK.

However, this number fell for brokers working at larger businesses – 38% of those employed at firms making an estimated turnover between £5m to £50m felt UKGI’s regulation was too restrictive, compared to 43% of respondents working at brokers with a turnover between £50m and £200m and 38% of brokers based at companies generating £200m or more in turnover.

Strength in regulation

However, industry-wide support for strong, clear regulation has remained prevalent.

In February 2025, FCA director of insurance Matt Brewis said at ABI’s annual conference that the UK insurance sector “is a strong place to do business because we have strong, stable, underpinning financial regulation”.

Although market participants mainly agree with the purpose and objectives of regulation, it is the associated burden of administrative reporting that poses problems, according to Five Star Rating Report: Commercial Lines and Personal Lines 2024/25 findings.

In the report’s verbatim comments, one broker noted: “It isn’t that the rules themselves are too strict, but the evidence required and frequency is too much, especially for SMEs.”

Another stated: “[While] there clearly needs to be a regulatory framework, sometimes this can be difficult to balance against the needs for running a business.”

A further broker told Insurance Times: “The broad brush approach [the FCA takes] does have a negative impact, although I do appreciate and fully support the need to continually improve the professionalism within our industry.”

In March 2025, the FCA published an update on its work to streamline its rules and reduce burdens on businesses via its new five-year strategic plan.

An FCA spokesperson told Insurance Times: “We are committed to reducing regulatory burden and acting proportionately.

”Supplying us with data is a significant task for firms, especially smaller ones. So, we are reviewing what information we ask for, ensuring we’re only collecting what we need and will use.”