FCA Deputy Executive Calls for Insurance Industry to Prioritise Consumer Trust
The insurance industry must intensify efforts to build consumer trust, addressing outdated practices and recent corporate scandals, according to the deputy chief executive of Britain's financial regulator. Speaking at the annual Association of British Insurers conference, Sarah Pritchard of the Financial Conduct Authority (FCA) emphasised that while innovation is enhancing consumer experiences, stronger relationships remain crucial.
Trust Deficit in Insurance Sector
Fresh FCA data reveals that up to 66 per cent of consumers exhibit low trust in the insurance sector, positioning it among the least trusted areas within financial services. Pritchard highlighted that merely developing effective products is insufficient; insurers must actively engage consumers to foster loyalty.
"It's not enough to create and scale a good product alone. To succeed you have to bring consumers with you when you walk through the doors," Pritchard stated. "Don't just assume they'll come along... it might not be easy but it is possible to build that trust through improving the consumer experience."
Enforcing Consumer Duty for Better Outcomes
The FCA is reinforcing its focus on trust through the Consumer Duty, implemented in 2023, rather than introducing new market-wide interventions. Pritchard noted that the duty's "fair value" requirements aim to deliver improved consumer outcomes more efficiently.
Recent actions include securing £200 million in compensation for 270,000 consumers who were underpaid by insurers after vehicle theft or write-offs. Additionally, the FCA confirmed that ensuring fair value for consumers paying insurance monthly has saved them £157 million, with over 50 per cent of reviewed providers reducing premium finance costs.
"We will continue our work informing [consumers']... understanding of what they're buying," Pritchard said. "We will review products and services for indicators of outcomes and look at how firms treat vulnerable consumers."
Addressing the Protection Gap
The FCA is also tackling the 'protection gap', where millions lack insurance, leaving them financially vulnerable despite available products. Although insurers accepted 98 per cent of claims in 2024, paying out £5.4 billion, significant gaps persist.
According to the latest FCA study, 26 per cent of people have no insurance, while 58 per cent lack 'pure protection products' like life insurance or income protection. Industry experts attribute this gap not only to costs—with average life insurance at about £29.75 monthly—but also to low awareness and limited access to regulatory advice.
Pritchard described the gap as "significant" and affirmed the FCA's commitment to collaborating with the industry to close it.
Reducing Burdens for Wholesale Insurance Firms
While urging the industry to regain consumer loyalty, Pritchard also announced measures to alleviate "disproportionate burdens" for wholesale insurance firms. These specialised intermediaries, often brokers, connect retail agents with carriers offering high-risk policies.
The FCA plans to eliminate "unnecessary data returns"—regulatory filings for monitoring financial stability—and provide "less intensive supervision" for firms consistently adhering to market rules.
"We want you to succeed but we need you to be confident to innovate and bring your consumers with you. Engage with us early and often," Pritchard concluded.
