FCA Proposes Product Governance Simplification for Insurers and Funeral Plan Providers
In December 2025, the FCA published Consultation Paper CP25/37: Targeted Clarifications of Handbook Materials, proposing a number of rule changes aimed at simplifying and clarifying product governance requirements across the insurance and funeral planning sectors.
For insurers, intermediaries and funeral plan providers, Chapter 5 of the consultation is particularly relevant. The FCA proposes removing duplicative Handbook text, consolidating existing expectations, and aligning governance and oversight obligations more clearly with the Consumer Duty framework.
The proposals are not intended to dilute regulatory standards. Instead, they reflect the FCA’s continued shift towards outcomes-focused regulation, with less emphasis on prescriptive rules and greater reliance on firms demonstrating effective governance, value assessment and oversight in practice.
This blog summarises the key proposals affecting insurance and funeral plan providers, and highlights what firms should now be considering ahead of implementation.
Key Proposals for Insurance and Funeral Plan Providers
1. Deletion of PROD 4.5 (Insurance Value Measures Rules)
The FCA proposes to delete PROD 4.5, which currently sets out specific expectations for manufacturers and distributors in relation to insurance value measures data.
The FCA considers this section to be duplicative, as the underlying obligations are already embedded within:
- PROD 4.2, covering product approval and governance processes
- PROD 4.3, covering product reviews and fair value assessments
Value measures are therefore not being removed; rather, they are being positioned as an integral part of the wider PROD framework.
What firms should consider:
Whether existing PROD 4.2 and 4.3 processes clearly and consistently incorporate value measures data, and whether this is adequately evidenced through governance documentation and MI.
2. Relocation of Distributor Obligations into ICOBS
The obligation currently set out in PROD 4.5.7R(1), requiring distributors to consider value measures data when reviewing distribution arrangements, will be relocated to ICOBS 5.2.
The rule will be explicitly linked to demand-and-needs assessments, reinforcing the distributor’s role in assessing whether a product remains appropriate to distribute, rather than reassessing the product’s value itself.
What firms should consider:
Whether distributor oversight processes clearly demonstrate how value measures and related data are used to inform distribution decisions, product withdrawal triggers and ongoing suitability assessments.
3. Governance Rules for Funeral Plan Products
For funeral plan providers, the FCA proposes removing the requirement for a minimum 12-month product review cycle. Instead, review frequency would be determined by the risk of harm to customers.
This approach aligns funeral plan governance more closely with reforms introduced for general insurance in PS25/21, while maintaining expectations around identifying and addressing poor customer outcomes.
What firms should consider:
How product review schedules can be recalibrated on a risk-based basis, and whether governance arrangements and Board MI clearly support this approach.
Implementation Timeline
Consultation closes: 27 January 2026
Final rules expected: Q2 2026
What Should Firms Do Now?
While CP25/37 is framed as simplification, firms should not underestimate the governance work required to demonstrate compliance under a more consolidated rule set. In particular, firms should consider:
- Reviewing PROD 4.2 and 4.3 frameworks to ensure value measures are clearly embedded and evidenced
- Revisiting distributor oversight arrangements, including escalation and product withdrawal triggers
- Updating product review schedules, MI and Board reporting to reflect a more risk-based approach
How Padda Consulting Can Help
The proposals in CP25/37 reinforce the FCA’s expectation that firms can clearly demonstrate effective product governance and oversight, even where detailed Handbook provisions are removed.
Padda Consulting supports insurance and funeral plan providers across areas including:
- Product Governance Simplification
- Mapping existing PROD 4.5 practices into PROD 4.2 and 4.3 frameworks
- Reviewing and streamlining product approval, review and value assessment processes
- Distributor Oversight Readiness
- Aligning oversight policies with the proposed ICOBS 5.2 requirements
- Providing structured documentation tools for assessing distribution suitability
- Funeral Plan Governance
- Recalibrating product review cycles based on customer harm potential
- Enhancing governance documentation and SMF accountability
If you would like to discuss how CP25/37 may affect your firm, or would like to arrange a targeted gap analysis of your governance framework, please get in touch.
