The FCA’s changing approach to MGAs

The Financial Conduct Authority (FCA) recently published its regulatory priorities for the insurance sector, providing a useful summary of what the regulator is focusing on over the next 12 months. 

The FCA continues to be outcome driven- particularly when it comes to customer understanding, product value and claims experience. At the same time, it is signalling that it wants to support innovation and growth across the sector. That balance is particularly important for Managing General Agents (MGAs), which often deal with product innovation, underwriting expertise and distribution. 

This article, drafted jointly by our Professional Liability and Claims Handling teams, looks at the FCA’s proposals, as well as what it might mean for MGAs.

What are the FCA’s primary areas of concern?

The ongoing focus on consumer outcomes remains a top priority for the FCA. This is clearly linked to the Consumer Duty, which has dominated most of the FCA’s actions since it was first implemented in 2023 – as well as it’s expectation that firms demonstrate how their products are genuinely delivering value to customers.

The FCA has highlighted concerns in areas such as claims handling and customer understanding of cover. The expectation is increasingly becoming that firms should not only comply with rules but also be able to evidence that the products they design and distribute work as intended. For MGAs, this is particularly relevant because they are often involved in product development as well as distribution. That means there is a growing expectation that MGAs can demonstrate robust product governance, clear customer communications and effective monitoring of outcomes throughout the lifecycle of a policy.

Delegated authority oversight under scrutiny

The FCA also plans to increase its oversight of outsourced and delegated arrangements, particularly claims handling. This means ensuring there is clarity around roles, oversight arrangements and reporting structures between insurers, MGAs and any third-party service providers. As the delegated model becomes more widely used, expectations around transparency and governance are naturally increasing.

From a claims handling perspective, this increased regulatory focus is particularly significant. Claims is effectively where the purchased product  is tested in practice  and is therefore central to the FCA’s assessment on delivery of good customer outcomes. For MGAs operating under delegated authority arrangements, this places greater emphasis on robust, well governed claims handling frameworks, whether this is handled in-house or outsourced to TPAs (third party agents) or law firms. This drives clear accountability, consistent reserving and decision-making, and high-quality management information to evidence fair and timely outcomes. In this context, claims data becomes a key asset, supporting both Consumer Duty compliance and broader insight into product performance.

Innovation and access to insurance

Importantly, the FCA’s priorities also recognise the importance of innovation and competition within the insurance market. The FCA has been clear that it wants the UK insurance sector to remain dynamic and capable of responding to emerging risks. This is an area where MGAs have traditionally played a significant role. 

The FCA is also keen to ensure that there is appropriate access to insurance and MGAs have an important part to play. They frequently operate in specialist segments or underserved areas of the market, thereby improving access to insurance.

The question of an MGA review

One of the issues that inevitably arises when discussing regulatory priorities is whether the growing scale of the MGA market will eventually lead to a more formal review of the sector.

MGAs have become an increasingly important part of the UK insurance industry; however, they are still regulated within the broader category of insurance intermediaries, which does not always reflect the complexity and vitalness of their role.

A more focused review of the MGA sector could help bring greater clarity to the regulatory framework surrounding delegated underwriting. It could also provide an opportunity to better define expectations around governance, oversight, and accountability within delegated authority arrangements.

At the same time, any review would need to recognise the value MGAs bring to the market. They play a critical role in driving innovation, developing specialist products and enabling insurers to access new opportunities.

Comment

The FCA’s regulatory priorities are not surprising – they accord with the direction the insurance market has been heading in over recent years. Firms are expected to demonstrate clear customer value, strong governance and effective oversight.

For the MGA sector, this is both a challenge and an opportunity. As the market continues to grow and mature, there is likely to be greater regulatory attention on how delegated authority models operate in practice. However, now more than ever, it is recognised that MGAs are an important part of a modern and innovative insurance market. 

The key for the sector will be demonstrating that the flexibility and specialisation MGAs bring can sit appropriately alongside strong governance and positive consumer outcomes.