Insurance industry must do more to build consumer trust, says FCA deputy executive
The insurance industry must do more to build consumer trust amid outdated practices and a flurry of corporate scandals, the boss of Britain’s financial regulator has said.
Speaking at the annual Association of British Insurers conference, Sarah Pritchard, deputy chief executive of the Financial Conduct Authority (FCA), noted that despite ongoing innovation within the sector that is improving the consumer experience, not enough is being done to strengthen relations.
As many as 66 per cent of consumers have low trust in the insurance sector, making it one of the least trusted within the financial services industry, according to fresh FCA figures.
Pritchard said: “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.
“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.”
Consumer Duty
The FCA has doubled down on its focus on improving trust between insurers and consumers through enforcing the Consumer Duty, which came into force in 2023. Pritchard noted the watchdog is opting not to bring in new “market wide interventions” in favour of using the duty’s “fair value” requirements to bring about “better outcomes for consumers and faster”.
This includes the authority securing £200m in compensation for 270,000 consumers who were shortchanged by insurers after their car was stolen or written off.
On Tuesday the body also confirmed it was ensuring all consumers who pay their insurance monthly get fair value from providers, saving them £157m, with over 50 per cent of providers reviewed by the FCA lowering the cost of premium finance.
Pritchard said: “We will continue our work informing [consumers’]… understanding of what they’re buying.
“We will review products and services for indicators of outcomes and look at how firms treat vulnerable consumers.”
Ensuring protections
The FCA is also looking to shorten the ‘protection gap’, with millions of people having no insurance, leaving them financially exposed upon injury or damage, despite the availability of products.
While insurers accepted 98 per cent of claims in 2024, paying out a total £5.4bn, many people still do not have necessary insurance products.
According to the latest study from the FCA, 26 per cent of people have no insurance at all, while 58 per cent do not hold any ‘pure protection products’, such as life insurance or income protection.
Industry figures have acknowledged that the gap is not just down to costs, with the average life insurance policy costing roughly £29.75 per month, but also because of a lack of awareness, with some consumers unable to access regulatory advice.
Pritchard hailed the gap as “significant” and confirmed the FCA’s intention to work with the industry to close.
Removing industry burdens
While Pritchard urged the industry to do more to win back consumer loyalty, she also noted that the authority will do more to remove “disproportionate burdens” within the sector for wholesale insurance firms.
Wholesale insurance firms are specialised intermediaries, often referred to as brokers, who connect retail insurance agents with carriers who offer high-risk policies not typically available in the general market.
The FCA is seeking to remove “unnecessary data returns”, regulatory filings used to monitor financial stability and market conduct, and promised “less intensive supervision” for firms that are consistently following market rules.
Pritchard said: “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.”