This package of proposals covers the scope of the rules for non-UK business, disclosure requirements, standards for advised sales, and professional indemnity insurance (PII) limits.

The direction is clear: less prescription, more reliance on the Consumer Duty, and reduced duplication for firms doing business internationally.

We love this stuff, so we’ve all read it cover to cover. Twice. Here's what the FCA's proposal to simplify insurance rules (CP26/22) means for firms, and what to do next. ‍

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What does CP26/22 cover?

The proposals bring together several strands of simplification, all aimed at reducing unnecessary burden while keeping appropriate protections in place. ‍

The consultation proposes:

• Narrowing the scope of ICOBS and PROD 4 so detailed UK conduct rules only apply where there's a clear UK connection, based on the customer's habitual residence and the location of the risk, reducing duplication with overseas regulators

• Removing several disclosure requirements seen as low-value or duplicative, including firm postal address, whether a firm is an insurer or intermediary, some conflict-of-interest disclosures, and remuneration "nature and basis" disclosures

• Giving firms more flexibility in how disclosures are delivered, removing the default to paper and allowing more digital-first communication, while still requiring paper on request

• Simplifying advised sales rules down to two clear categories: personal recommendation (advised) and non-advised, removing the murkier "advice but not a personal recommendation" category

• Converting minimum PII limits for insurance intermediaries from euros to sterling, with the underlying levels of cover unchanged

Most of these changes are optional, meaning firms can continue operating as they do now if that suits their business model. The exceptions are the change to the scope of rules for non-UK business and the PII currency change, both of which will apply across the board.

The FCA is consulting on these proposals until 4 September 2026, and given the deregulatory nature of the package, expects the rule changes to come into force shortly after they're finalised. ‍

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What do firms need to do?

Throughout the paper, the message is one of opportunity rather than obligation, but firms still need to actively review and adopt the changes to benefit from them.

Firms with any non-UK customers or non-UK risks should review which parts of their book would fall outside ICOBS and PROD 4 scope under the new rules, while all firms should take the opportunity to review their current disclosure documents and identify what can be trimmed without falling foul of wider Consumer Duty obligations.

‍In short, actions for firms on the back of CP26/22:

• Review overseas business against the new UK-connection test for ICOBS and PROD 4

• Audit current disclosure documents and identify what can be simplified or removed

• Reassess default communication channels, moving toward digital-first disclosure with an easy opt-in for paper

• Review sales processes to confirm which activities count as a "personal recommendation" under the simplified two-category model

• Insurance intermediaries should check current PII policies against the new sterling-denominated minimum limits ahead of renewal

• Consider responding to the consultation by 4 September 2026 if the proposals affect your business model
  

In practice, this could mean firms updating documents and rethinking how much of their disclosure and advice process is built on requirements that no longer need to be there.

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‍Key takeaways

This is a deregulatory package, but the benefits aren't automatic!  

Firms need to actively review and adopt the changes to see any reduction in compliance burden.

Firms with material overseas business have the most to gain from the scope changes, while UK-only firms will see a more limited impact.  

As with other recent consultations, reviewing disclosures and PII cover now avoids a last-minute scramble once the rules are finalised. ‍

Need a hand?

As always, our expert compliance team is here to help.  

If you have questions about how the FCA's proposals on simplifying insurance rules may affect your firm, or need guidance reviewing your disclosures, sales processes or PII cover, book a call now.  

We love to chat!

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