Simplifying the Insurance Rules – CP25/12

In CP25/12, the FCA sets out a vision for insurance rules that are simpler, smarter, and better aligned to innovation, competitiveness, and proportionality—especially in the commercial space.

Building on DP24/1 and the FCA’s January 2025 commitments, this consultation proposes targeted reforms that give firms more flexibility while retaining core consumer protections. It’s about freeing up well-run firms to do more, without losing sight of the fundamentals.

What’s Changing—and Why It Matters

These aren’t cosmetic updates. The proposals challenge legacy processes and offer firms a chance to align compliance with commercial logic.

• Redefining Commercial Risks
  A new category of “contracts of commercial or other risks” will exclude large business clients from certain conduct rules—bringing the regulatory scope in line with Financial Ombudsman eligibility and reducing overreach.
• Lead Manufacturer Clarity
  Insurers and Lloyd’s managing agents will be allowed to act as lead manufacturer under PROD 4—owning compliance responsibility and cutting duplication in co-manufactured products. One lead. One standard. Less confusion.
• Expanded Exemption for Bespoke Contracts
  The exemption for policies designed at a client’s request gets clearer and broader. It now applies to both insurers and intermediaries, easing governance where the product is genuinely custom-made.
• Smarter Product Reviews
  Out with the rigid 12-month review cycle. In its place: risk-based intervals based on complexity and potential for consumer harm. It’s a win for operational efficiency—and regulatory effectiveness.
• Streamlined EL Reporting
  Standalone Employers’ Liability (EL) reporting obligations will go. Firms can instead rely on existing breach notifications—reducing administrative noise without compromising oversight.
• Training That Reflects Real Competence
  The mandatory 15-hour CPD rule will be abolished for insurance and funeral plan staff. Instead, firms will design training that reflects actual business needs and role-specific competencies.
• Territorial Scope Reform
  The FCA is exploring disapplying ICOBS and PROD 4 where both the customer and risk sit outside the UK. This could be a game changer for wholesale and London Market firms—cutting duplication and boosting cross-border competitiveness.

What Happens Next?

For the FCA

• Consultation closes 2 July 2025
• Policy Statement due Q3 2025
• Final rules will take immediate effect upon publication

For Firms:

•  Review the proposals. Focus especially where commercial segmentation, overseas activity, or governance structures are impacted.
• Map your exposure. Consider where changes to product reviews, bespoke policies, and training requirements will require internal updates.
• Engage stakeholders. Draft new governance models, training matrices, and lead manufacturing responsibilities.
• Hold the line. Stay compliant with current rules until final changes are confirmed—no early moves.

Where Padda Consulting Can Help

This isn’t just about responding to a consultation—it’s about preparing for the operational and cultural shift the FCA is signalling.

Padda Consulting works alongside regulated insurance firms to implement change with clarity, speed, and assurance. Here’s how we can support you:

• Impact Assessments
  Understand how CP25/12 affects your customer base, product lines, and cross-border operations.
• Consultation Response Support
  Craft precise, commercially grounded responses to the FCA—backed by evidence and aligned with your strategic goals.
• Governance Framework Redesign
  Align your product oversight, distribution monitoring, and competence frameworks with the FCA’s proposed risk-based model.
• Territorial Scope Analysis
  Evaluate how potential rule disapplication impacts your overseas business—and how to manage that risk intelligently.
• Board and Team Enablement
  Develop internal guidance, policy documents, and board packs that translate the consultation into clear action steps.
• Change Implementation Planning
  Build an implementation roadmap that ensures you’re ready the moment the final rules drop—without disruption.

To arrange a CP25/12 briefing or compliance readiness review, contact us at info@padda-consulting.co.uk.