FCA's anticipated priorities for InsurTechs

The regulatory landscape for UK InsurTechs is entering a decisive phase. As the FCA increasingly pivots from rule-setting to active supervision and enforcement in 2026, innovative insurance firms face a clear choice: raise standards now or risk regulatory intervention later.

The FCA's new five-year strategy centres on four strategic priorities: smarter, tech-enabled regulation; sustainable growth; stronger consumer outcomes; and fighting financial crime. For InsurTech companies, these priorities demand immediate attention and strategic adaptation.

Consumer protection and the Consumer Duty

The Consumer Duty moves from implementation into active supervision and enforcement in 2026. This regime requires insurers and intermediaries to deliver good customer outcomes in practice, rather than simply meeting formal compliance requirements.

InsurTech companies must be able to demonstrate that their products offer fair value, that policy terms are transparent, and that vulnerable customers receive appropriate support. The FCA will scrutinise pricing structures, product design and customer treatment, ensuring that innovative offerings genuinely benefit consumers rather than take advantage of information asymmetries.

A key focus is the "price and value" outcome under the Consumer Duty, with firms expected to hold robust evidence that products are fairly priced. This is particularly relevant in the general insurance sector where loyalty penalties have previously attracted regulatory scrutiny. The regulator expects firms to carry out regular assessments comparing the price customers pay against the benefits they receive, and to take action where products fall short.

The FCA will also examine how firms treat vulnerable or less tech-savvy customers. Many InsurTech solutions rely heavily on digital interfaces and automation, so firms must ensure these do not inadvertently exclude customers who struggle with technology or financial literacy. Appropriate support mechanisms – such as alternative communication channels, simplified explanations, or access to human assistance – will be essential to ensure all customers can access and understand insurance products effectively.

Insurance claims and sales practices under review

Following a Which? super-complaint highlighting serious failings in home and travel insurance, including poor claims handling and unclear policy wording, the FCA launched targeted supervisory work in late 2025. In 2026, firms should expect detailed reviews of claims handling standards, including how InsurTech partnerships use third-party administrators and technology within claims processes. Where AI-driven systems are used to support or automate claims decisions, firms must ensure appropriate oversight and governance, with clear accountability remaining with the firm for decisions that affect customer outcomes.

The FCA will also examine how insurance products are sold, assessing whether customer outcomes differ by distribution channel. Online aggregators, app-based sales, and embedded insurance offerings are likely to face particular scrutiny. InsurTech firms must ensure that seamless digital sales journeys do not mislead customers about policy limits, exclusions or key features. The regulator is likely to take action, including enforcement or requiring product changes, where it identifies confusing or unfair terms. Firms should therefore proactively review their customer journeys, policy documentation, and sales processes to identify and remediate potential issues before regulatory intervention becomes necessary.

Supporting innovation and growth

The FCA has a new secondary statutory objective to support sustainable industry growth alongside consumer protection. Through its Innovation Hub and regulatory sandbox programmes, the regulator offers InsurTech firms opportunities to test new products and business models in controlled environments. Recent initiatives include a Smart Data Accelerator on open finance and pilot AI sandboxes, reflecting the FCA’s collaborative approach to digital innovation.

The FCA is working with government and industry on the development of an open finance framework that could extend open banking-style data portability to insurance products. Late 2025 saw FCA-supported partnerships and technology sprints aimed at accelerating this work. While initially focused on areas such as SME lending and mortgages, open finance has the potential to enable greater data sharing in insurance, empowering consumers to share policy data with third-party applications and compare products more seamlessly.

This could significantly improve customer experience by reducing friction in switching and enabling more personalised offerings. InsurTech firms should therefore monitor the 2026 roadmap for integration opportunities, while ensuring robust data security, privacy protections, and consent management frameworks are in place to meet regulatory expectations.

Operational resilience and third-party risk

With operational resilience requirements fully in force by March 2025, the focus in 2026 shifts from planning to demonstrating operational resilience in practice. The FCA is expected to test firms' capabilities through supervisory reviews, which is particularly relevant for InsurTech companies that rely heavily on cloud platforms and outsourced services. Firms must be able to demonstrate that they can withstand operational disruptions – including system outages, cyberattacks, or sudden spikes in claims volumes – without causing intolerable harm to customers. 

This requires firms to set clear impact tolerances for their important business services, map key dependencies, carry out regular scenario testing and maintain effective response and recovery plans. New rules also allow regulators to designate certain cloud computing or software providers as "critical third parties", subjecting them to direct oversight and resilience standards. InsurTech firms that depend on cloud services should therefore review their vendor arrangements, ensure contractual terms support resilience requirements, and develop contingency plans to manage disruptions where critical suppliers are affected.

ESG and sustainable insurance

The FCA's anti-greenwashing rule under the Sustainable Disclosure Requirements requires any sustainability-related marketing to be clear, fair, and not misleading, and to be supported by robust evidence. InsurTech firms promoting sustainability-branded or 'eco-friendly' insurance products must therefore have strong data, controls and governance in place to substantiate such claims. Firms are expected to demonstrate how sustainability features operate in practice, the impact they are intended to deliver, and why any environmental claims are justified.

Alongside this, new ESG-related disclosure requirements and emerging sustainability labelling products are intended to help build consumer trust in sustainability-branded offerings. The FCA has signalled its support for innovation in areas such as climate risk insurance or parametric cover for extreme weather events, but will closely scrutinise whether customers properly understand these products and whether they deliver fair value. As climate change increases the frequency and severity of insured events, InsurTech firms developing innovative solutions can expect regulatory engagement to ensure consumer protection keeps pace with product innovation.

Financial crime and AI oversight

Fighting financial crime remains critical in 2026 as fraud and money laundering threats continue to evolve. For InsurTech companies, the FCA will scrutinise anti-money laundering systems and controls, customer verification processes, and the effectiveness of fraud prevention technologies. The regulator has repeatedly warned that rapid business growth can outpace compliance infrastructure, creating vulnerabilities if controls do not scale appropriately. InsurTech firms should therefore ensure that their financial crime frameworks grow in step with their business models.

In parallel, 2026 is likely to see further guidance as the FCA continues to develop its approach to artificial intelligence governance. The regulator has launched AI sandboxes and other safe testing environments that emphasise safety, transparency, fairness, accountability, and contestability. InsurTech firms using AI for pricing, underwriting, or claims automation must ensure that algorithms do not inadvertently discriminate or lead to unfair customer outcomes. This requires robust governance arrangements, including senior management oversight, model validation and bias testing, as well as the ability to explain algorithmic decisions to customers in clear and accessible terms.

Conclusion

The FCA's priorities for 2026 point to a more demanding yet supportive regulatory environment for InsurTech innovation. Firms that embrace compliance proactively – by embedding consumer-centric design, rigorous controls, transparency, and robust governance – can turn regulation into a source of competitive advantage through enhanced customer trust.

Strong conduct standards and operational resilience will be fundamental building blocks of long-term success for innovative insurers in the UK market.