The Big Question: Which regulations and data reporting should the FCA cut to boost industry growth, following letter to PM?

James Daley, managing director, Fairer Finance

Regulation is rarely perfect – and almost always has unintended consequences.

But it is also essential for creating fair markets – both for consumers and businesses.

For that reason, all regulators have a duty to continually monitor the impact of the rules they implement – and make changes where they think they have got the balance wrong.

While there are undoubtedly areas where regulation can be improved and streamlined, I strongly disagree with the recent central government rhetoric suggesting regulation has gone too far and is now standing in the way of growth.

In financial services, the standard of conduct – as well as levels of public trust – have been steadily improving over the last 24 years, since the Financial Services Authority was set up.

Some of the rules that were handed to the UK from the European Union (EU) – particularly in relation to disclosure – were a bit clunky. There is room to amend those now.

Indeed, the FCA has only recently concluded its consultation on how it can streamline its handbook now that the Consumer Duty is in place – this closed in October 2024. I’m hopeful we’ll see some meaningful changes later this year.

But the broad regulatory framework is working. And Consumer Duty, which is only 18-months-old, has enormous potential to continue raising standards. Industry and consumer groups should stand side by side to defend the current system.

Any major deregulation will prove disruptive for the industry and will undermine consumer confidence, which will be bad for both businesses and their customers.

Peter Blanc, global head of M&A, Howden

Since its introduction in July 2023, it is clear that Consumer Duty plays an important role in making sure that the insurance products sold are fit for purpose and provide fair value.

The way that this regulation has been drafted, however, means that brokers are required to assess outcomes for almost all types of customers – regardless of their sophistication. This is leading to huge amounts of unnecessary work and a duplication of effort.

We would like to see the definition of ‘consumer’ tightened to simply reflect those customers that need protection – private individuals and tradespeople.

Howden, along with many other brokers, provides individual tailored advice to its customers. Duplicating that advice with product governance rules designed for non-advised sales makes no sense and simply adds a burden to businesses.

The government’s thrust to streamline regulation provides a welcome opportunity to rethink the Consumer Duty and product governance rules, applying them solely where they need to be applied – non-advised sales to private consumers.

Julie Comer, head of compliance, Biba

The regulatory rulebook for insurance is extensive and stripping out unnecessary regulation will not happen overnight – but we are encouraged that the FCA started its first call for input in July last year.

This focused on the Insurance Conduct of Business Sourcebook (ICOBS). In its response, Biba highlighted at least 11 ICOBS rules that could be removed entirely, plus further rules which could be reformed or enhanced.

We support the FCA’s plans to streamline the handbook and further its outcomes-based regulatory approach.

We also acknowledge that data is necessary to pursue the regulator’s objectives.

However, collecting high volumes of data from every firm, regardless of size, is not proportionate and places a considerable burden on our sector – in particular, on smaller firms.

Biba responded to the 2024 consultation on consumer credit regulatory returns – published in September 2024 and open until 31 October 2024 – strongly opposing the proposals that would increase data collection, not reduce it.

These proposals would result in a significant financial drain on businesses as they are forced to pay for information technology (IT) system changes and staff training.

Biba will continue to support the regulator’s trimming of redundant rules and will provide further input on other rules which could be removed or simplified, with an eye to the FCA’s secondary international competitiveness and growth objective.

Branko Bjelobaba, principal, Branko

Regulation has one sole purpose – to protect customers.

Anything that regulators impose has to be with that single focus – and the FCA needs to rethink areas that customers are simply not being protected.

One such example is the millions of leaseholders who are still overpaying for their insurance. Now, they get to see by how much they are overpaying, beyond the rules we have in our handbook right now.

Firms are reporting data at least twice a year and the larger organisations are reporting data four times a year. I wonder what the FCA really does with this data?

As an example, firms have reported annual percentage rate (APR), fee and charges data across household and motor lines for the last three years, so how is it possible that some firms can still be ripping off people with APRs of 48% and imposing draconian and grossly inflated charges?

Surely a firm reporting figures of this nature should be spoken to – but apparently not.

Regulation is necessary to protect us all, but the regulator needs to do just that. To aspire to be a profession, we need to be trusted and we need to get kids to want to work in insurance as a first choice – we still have a long way to go.

The same can be said for virtual reality gaming. While the prominence of this technology has accelerated in recent times, underwriting approaches previously deployed for wearable health tech and arcade machines are still relevant.

Rocio Concha, director of policy and advocacy, Which?

As regulators are asked to think more deeply about how they can contribute to the government’s pro-economic growth agenda, regulation has found itself in the crosshairs.

For some, regulation is holding firms back from achieving their full potential. Which? too would support cutting red tape where it is duplicated or stopping companies from innovating for the benefit of their customers. But this should not mean that firms get carte blanche to behave poorly.

In insurance, Which? research has found a whole host of consumer issues.

Instead of looking for areas to cut regulation in this sector, the FCA should instead raise its game of enforcing already existing requirements – especially under the Consumer Duty, which has in some quarters become something of an industry punchbag.

It is difficult to see how, for example, car and home insurers charging customers monthly APRs of around 30% – which are comparable with the pricier credit card lenders – represents fair value when you consider that customers who pay monthly often do so not out of choice, but financial necessity.

It is also tricky to believe all insurers are meeting their regulatory obligations to deliver good outcomes for their customers when our research has found that the claims handling process is often such an ordeal.

We’ve found plenty of examples of customers needing to endlessly resubmit evidence for their claim, being left in the dark during the process and then not told why their claim has only been partially accepted.

Which? fully supports the government’s push for economic growth. But consumer protections, proportionate and properly enforced, go hand in hand with that mission.

Consumers must be able to trust the products they buy. Ministers and regulators should not lose sight of that.