Insurance Law and Regulation
The regulatory architecture
The UK operates dual regulation. The Prudential Regulation Authority (PRA) supervises insurer solvency and capital; the Financial Conduct Authority (FCA) regulates conduct, market access and consumer protection under the Financial Services and Markets Act 2000. Insurers and intermediaries must satisfy threshold conditions, comply with the Senior Managers and Certification Regime (SM&CR), and follow the Insurance Distribution Directive (IDD) when advising or arranging. The FCA's Consumer Duty requires firms to act to deliver good outcomes in four areas: products and services, price and value, consumer understanding, and consumer support.
Contract law duties
For commercial insureds, the Insurance Act 2015 requires a fair presentation of risk: disclosure of material circumstances, a reasonable search, and clear presentation. Remedies for breach are proportionate: avoidance and return of premium for deliberate or reckless breach; for other breaches, the insurer may avoid, reduce the claim or apply different terms depending on what it would have done. For consumers, CIDRA 2012 replaces the old duty with a duty to take reasonable care to answer questions honestly and accurately; remedies depend on what the insurer would have done.
Complaints, compensation and data
Firms must handle complaints promptly and fairly. The Financial Ombudsman Service (FOS) can consider complaints after a firm's final response or eight weeks. The Financial Services Compensation Scheme (FSCS) protects eligible policyholders if an insurer fails. Data protection law (UK GDPR and Data Protection Act 2018) governs personal data in underwriting and claims.
Worked example
A consumer omits a medical condition when buying travel cover. The insurer would have charged £750 instead of £500 but would still have insured. A £10,000 claim arises. Under CIDRA the remedy is proportionate: £10,000 × (500 ÷ 750) = £6,666.67, not avoidance. If the insurer would not have insured at all, it may avoid and return the premium. For a commercial insured, the Insurance Act 2015 analysis asks what the insurer would have done had the risk been fairly presented, and the same proportionate approach or different terms may apply.
Traps that cost marks
- Applying the Insurance Act 2015 to consumers.
- Treating every non-disclosure as automatic avoidance.
- Confusing FOS (complaints) with FSCS (insolvency).
- Treating the Consumer Duty as optional guidance; it is a regulatory rule.