The FCA’s pro-growth agenda should not be mistaken for regulatory leniency

This article originally appeared in Insurance Day, July 2025.

The FCA is responding to a growing recognition well-functioning markets are created through a regulatory environment that enables innovation, reduces friction and helps firms compete effectively on a global stage. 

It seems not a day goes by without a new development or consultation announced by the UK’s Financial Conduct Authority (FCA).

While such changes are commonplace, the extent and speed at which they are taking place is unprecedented. It signals a shift in the FCA’s approach to regulation. Positioning itself as a more proportionate, pragmatic and forward-looking regulator, the FCA recognises the critical role financial services play in driving UK economic growth – and that perhaps it is time to balance risk with reward.

What does this mean for those it regulates and their insurers? Could too much change increase mistakes being made and spur more complaints?

There has been a healthy amount of scepticism from the industry: how much impact will it really have? Well, the changes are more than just rhetoric – they are backed by tangible actions. It reflects a growing recognition well-functioning markets are created through a regulatory environment that enables innovation, reduces friction and helps firms compete effectively on a global stage. The FCA has seemingly committed to supporting the UK’s international competitiveness and long-term economic growth.

What are the changes? The FCA’s recent consultation outlined a potential overhaul aimed at reducing regulatory complexity for insurers and brokers. Key proposals include broadening the existing large risk category – meaning larger commercial customers will not need to deal with retail-level conduct rules, while still maintaining safeguards for small to medium-sized enterprise and retail clients.

Additionally, insurers may also appoint a single lead who will be responsible for ensuring product governance under the product oversight and governance rules in co-manufacturing arrangements.

Described by the FCA as “once-in-a-generation” change, the proposals include allowing advisers to offer investment advice to groups sharing common characteristics, such as those holding excess cash or who are drawing down on their pension unsustainably, without the need to conduct full suitability reviews.

Targeted oversight 

Significant updates to the way complaints are reported is also expected. It aims to simplify reporting to the FCA, as well as making the collected data more useful. The intention is to reduce the workload, but it will also mean a more targeted approach to the oversight of complaints. The FCA intends to focus on complaints that may increase consumer harm or highlight systemic issues. As a result, greater scrutiny should be expected where patterns of poor customer outcomes emerge, even if complaint volumes are relatively low.

As you can see, there are significant changes at the FCA, but it does not stop there. Arguably the FCA’s shift is nowhere more visible than with the recent proposed changes to the Financial Ombudsman Service (FOS).

Whether it is charging claims management companies (CMCs) to bring claims to FOS or reducing the level of interest FOS can award, it feels like the ombudsman is moving away from its overly consumer-friendly approach to one that is fair for all. Considering the examples above, firms have long been charged when more than three complaints were made against them in any one year, but CMCs have been able to refer large volumes of claims to the FOS with no “skin in the game”.

The extent and speed at which changes are taking place is unprecedented. It signals a shift in the FCA’s approach to regulation. Positioning itself as a more proportionate, pragmatic and forward-looking regulator, the FCA recognises the critical role financial services play in driving UK economic growth.

CMCs could refer hundreds of (potentially fruitless complaints) without any cost or impact to them. Equally, the FOS has historically awarded interest of 8% on claims – significantly higher than the Bank of England base rate – unfairly penalising firms. Interest would also be charged from the date of the alleged negligent act, regardless of how long it took the complainant to progress the matter.

While these changes were showing progress, they arguably did not go far enough. Luckily, further changes are expected to be announced this month, which could make the changes discussed above look minimal in comparison.

These include a new appeal process, allowing the FCA to accept challenges against FOS decisions (a far cry from the existing system where the only appeal option is to judicially review the FOS – a high hurdle to overcome). A complaint long-stop could also be introduced. This would be welcomed by all in the industry, who currently face uncertainty given the FOS has no time limit for considering claims. Unlike the courts, the FOS has no 15-year long-stop and provided it considers the complainant lacked knowledge more than three years ago, it can consider the complaint.

Take a practical example: Mr A receives advice in 2012 but only discovers in 2025 it may have been inappropriate. He has until 2028 to bring a complaint (three years from acquiring that knowledge), despite the advice being 16 years old. Furthermore, if the firm provides a complaint response, but fails to include FOS rights (that is, fails to confirm the complainant can refer their complaint to the FOS), the six-month deadline to escalate to the FOS does not begin, so the complaint can be referred at any time thereafter. This creates an unreasonable level of uncertainty for insurers managing their claims.

Balancing act

This overhaul is welcome news, but, to be clear, the industry is not asking to have the balance of powershifted in its favour, simply for the scales to be more balanced than they are at present.

We are witnessing perhaps the greatest reshaping of the UK’s financial regulatory landscape in recent years. The FCA faces a challenging mandate: to drive innovation across financial services while strengthening consumer protection. Recent reforms make clear the regulator is committed to delivering substantive change, not just signalling intent.

Whether these changes will lead to a rise in claims against those regulated by the FCA, including insurers and intermediaries, remains to be seen. The theme that can be taken from the changes is the FCA is keen to help boost the UK economy and, as a result, more relaxed regulation is expected. Despite this, the risks to those regulated by the FCA have never been greater.

The change in approach may prove difficult for advisers. It is asking them to adapt their long-standing way of working and allowing them to offer products/advice that were deemed inappropriate until recently. Equally, can firms rely on these new changes to support past advice? That is unlikely, but it adds to the general feeling of uncertainty. And while the changes are coming, it does not mean complaints are any less likely. In fact, complaints may be more common, given consumers will be offered greater options, some of which are inherently riskier.

The FCA’s pro-growth agenda should not be mistaken for regulatory leniency. If anything, failure to meet expectations – particularly at a time when the FCA is actively working to support the industry – may draw sharper criticism and more decisive intervention than before.