Health and protection insurance intermediaries will no longer have to disclose to customers where they use only exclusive single-tie arrangements or a panel of insurers when selling products to retail customers.
Proposals from the Financial Conduct Authority (FCA) will also mean advisers no-longer need to declare where insurers hold more than 10% in their firms, or vice-versa, or their remuneration process.
The changes are part of a major overhaul of insurance rules by the regulator which it believes will make the industry easier for consumers to understand.
In its CP26/22 Simplifying insurance rules consultation paper, the regulator said: “Our aim is to make disclosures more meaningful for consumers, while giving firms greater flexibility to communicate effectively.”
Two years ago, the regulator called on firms to suggest rules which could be eliminated or simplified if they are already covered by the Consumer Duty.
Responses for the consultation paper are open until 4 September 2026.
Single-tie arrangements
Current rules require intermediaries selling protection, health or other insurance contracts to inform customers “in good time before the conclusion of an initial contract of insurance” if they are under an exclusive distribution deal with one or more insurer and who that insurer is.
These single-tie arrangements can limit the choice and availability of cover to customers and can be common in some markets such as through banks and building societies.
However, the FCA is proposing to remove the whole section of ICOBS 4.1.6 meaning this potential disclosure of single-tie arrangements would no longer be required.
Panels
Rules around declaring the panel of insurers used by intermediaries will be scrapped under the FCA proposals.
Rather than being whole of market, firms selling protection and health insurance products to consumers can be limited to a restricted panel of insurers.
Under current rules intermediaries are required to inform customers about the panel.
The ICOBS 4.1.8 rules highlight that “the panel selection criteria will be important in determining whether the panel is sufficient to meet the ‘fair analysis’ criteria.
“Selection should be based on product features, premiums and services offered to customers, not solely on the benefit offered to the firm.”
However, all this would be removed under the regulator’s plans.
“We also propose to remove existing guidance in ICOBS 4 about the use of panels to determine whether a fair analysis of the market is being undertaken,” it said.
“Under our proposed changes, the guidance is no longer necessary.”
Remuneration
The FCA is proposing removing disclosures about the ‘nature and basis’ of remuneration received by intermediaries and the remuneration of employees.
“We introduced these disclosures regarding remuneration when implementing the Insurance Distribution Directive (IDD),” it said.
“We no longer consider that these requirements are reflective of our regulatory approach.
“The focus of our rules is on the manufacturer ensuring fair value of the product rather than disclosing remuneration information and relying on the customer to consider whether the remuneration is fair.
“This is consistent with research by Which?, showing that customers do not engage with buying insurance in the way they might for other financial products.”
It argued that in practice, the requirements led to firms providing high-level and categorical descriptions of the potential ways firms and employees may be remunerated, which can become overly long and result in information overload.
However, it added that firms would still be expected to make sure any remuneration received was “consistent with the provision of fair value and that conflicts of interest are appropriately managed”.
Shareholdings and conflicts of interest
The FCA is proposing to strip away several declaration requirements managing conflicts of interests between insurers and intermediary firms.
This includes where an insurer or its parent company a direct or indirect holding representing 10% or more of the voting rights or capital in the firm.
The reverse requirement for advice firms owning 10% of insurers would also be removed.
Furthermore, intermediaries would no longer have to disclose if they are working on behalf of the customer or on behalf of the insurer.
“Some intermediaries may have relationships with multiple insurers and may be acting for and on behalf of the insurer and consumer at different stages,” the FCA said.
“These disclosures can result in long lists and dense text that consumers are unlikely to read or recognise as conflict of interest information.”
It added: “We consider that the disclosures referenced above do not materially enhance customer understanding and can contribute to longer, more complex disclosures.
“Firms have broader obligations in PRIN, SYSC and the Consumer Duty to identify and manage conflicts of interest appropriately and to provide customers with information that supports effective decision-making.
“Firms will still need to consider whether disclosure is necessary in a given case to meet those obligations.”
