UK FCA Maintains Outcomes-Based Consumer Duty Approach as Premium Finance APRs Fall 4.1%

The UK's Financial Conduct Authority (FCA) is maintaining its shift from prescriptive, rules-based regulation toward an outcomes-focused, principles-based approach anchored by the Consumer Duty, which is now fully in force for both open and closed insurance products. The strategy has produced measurable results in the premium finance market, where the regulator's scrutiny has driven down the cost of paying for insurance monthly.

The FCA's Premium Finance Market Study (MS24/2, finalized February 2026) confirmed that average annual percentage rates (APRs) on insurance premium finance — which allows consumers to pay for motor and home insurance in monthly installments rather than annual lump sums — have fallen by 4.1% since 2022. Premium finance was used in approximately 48% of UK motor and home policies in 2023, making it a significant consumer cost. The FCA attributed the decline directly to supervisory pressure under the Consumer Duty, which forced firms to justify and improve their fair value assessments.

Crucially, the FCA declined to impose sector-wide interventions such as a mandatory APR cap or commission ban, concluding that such mandates would risk reducing market access and increasing premiums — potentially harming the very consumers they were designed to protect. Instead, the regulator committed to ongoing monitoring of pricing through regulatory data, direct supervisory engagement with outlier firms, and continued use of Consumer Duty powers to act against firms not delivering fair value. Broker-linked finance remained more expensive on average but was not found to be systematically harmful.

The premium finance findings sit within a broader FCA agenda for 2026 and beyond. The regulator is advancing a planned consultation on distribution chain responsibilities (clarifying the allocation of duties between product manufacturers and distributors), implementing significant changes to the rules on insurance-based investment products, and developing a new consumer composite investment (CCI) disclosure regime that replaces the unpopular PRIIPs framework — with the full regime not coming into force until June 8, 2027, though firms can adopt new product summaries from April 2026. The FCA is also responding to a Which? super-complaint about consumer outcomes in home and travel insurance markets, and continuing its pure protection market study. The consistent message to the industry: the era of outcomes-based regulation under Consumer Duty is intensifying, and the FCA will intervene directly wherever consumer harm is identified.