FCA sets new expectations for insurance firms managing conflicts of interest
New guidance aims to ensure customers aren't disadvantaged by the way insurers handle conflicts in their business models.
The Financial Conduct Authority has published new guidance on how general insurance firms, including those selling protection and life insurance, should manage conflicts of interest arising from vertically integrated business models. The guidance sets out the regulator's expectations for how firms should identify, manage and mitigate conflicts that could harm customers.
The FCA is particularly focused on situations where insurers own both the insurance business and other parts of the supply chain, such as loss adjusters or claims management firms. These ownership structures can create incentives to favour certain suppliers or products over others. For protection and life insurance customers, this matters because insurers' internal conflicts can influence claims handling, product design, and pricing. When an insurer has a financial interest in a related firm that handles claims, there is a risk the insurer might be incentivised to reduce claims payouts to protect related business profits, or to steer customers towards higher-margin products.
Under the new guidance, firms must adopt a proactive approach to identifying where conflicts might arise. They must put in place processes to manage and mitigate those conflicts, and monitor their effectiveness. Firms are expected to ensure that their governance and systems support fair treatment of customers even when the firm has financial incentives pulling in another direction.
Based on reporting by FCA guidance on conflicts of interest in insurance (23 July 2026). Information only, not advice.
Information only. This is general information, not financial, tax or legal advice, and not a personal recommendation. Tax rules depend on your individual circumstances and can change. Please speak to a qualified, FCA-regulated adviser or a solicitor before acting.