The Financial Conduct Authority (FCA) has delivered a significant win for the industry with the publication of Policy Statement PS25/21: Simplifying the insurance rules.
This is the final step following the consultation paper CP25/12, and it represents a fundamental shift: the FCA is moving away from a one-size-fits-all, rigid regulatory framework towards one that is proportional, flexible, and supportive of competitiveness.
This is your chance to streamline your compliance, reallocate resources, and truly deliver on the promise of “Faster and Easier Compliance for Insurance Brokers.”
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What is FCA PS25/21 and Why Does it Matter?
Published on December 9, 2025, PS25/21 sets out the finalised, optional rules that simplify various requirements across the insurance and funeral plan sectors.
The core purpose of this Policy Statement is to reduce the administrative and compliance burdens on firms while maintaining the high standards of customer protection established by the Consumer Duty.
By offering flexibility, the FCA is empowering firms like yours to tailor your compliance efforts to the actual risk profile of your customers and products.
For commercial insurance brokers and intermediaries, the changes are centred around three pillars of simplification:
| Area of Simplification | The Change | The Broker Opportunity |
| Client Segmentation | Redefining “Commercial” to align with Financial Ombudsman Service (FOS) thresholds. | Apply a lighter touch of conduct rules (ICOBS/PROD) to genuinely larger, more sophisticated commercial customers. |
| Product Governance (PROD) | Removal of the mandatory 12-month minimum product review frequency. | Implement a risk-based review cycle, freeing up time from low-risk, stable products. |
| Training & Competence | Removal of the minimum 15 hours of annual CPD requirement for non-investment insurance distributors. | Pivot to outcomes-focused training, ensuring competence through effective, targeted learning, not just clock-watching. |
Practical Conformance: Your 3-Step Action Plan with My Virtual Compliance
The new rules are effective immediately (from December 9, 2025), but crucially, they are optional. You can maintain the status quo, but doing so means missing out on significant efficiency gains.
Here is MVC’s practical action plan for your brokerage to adopt the PS25/21 changes and leverage this flexibility:
Step 1: Document Your Client Categorisation Policy
The new definition of commercial clients aligns with the FOS eligible complainant definition (based on factors like turnover, balance sheet, and employee count).
This means many of your larger clients may now fall outside the scope of key conduct rules like ICOBS and PROD 4.
How to Conform Practically:
- Audit Your Data: Immediately review your client onboarding and renewal processes to ensure you are consistently capturing the necessary financial and staffing data to accurately apply the new FOS-aligned thresholds.
- Define Your Perimeter: Clearly document which segment of your clients you will continue to treat as “retail” (and thus subject to full Consumer Duty protections) and which you will treat as “commercial or other risks.”
- Document Rationale: Record your decision. If you choose to apply a lighter touch to a larger commercial client, you must justify why their size, sophistication, and bargaining power means they do not require the same protections as a micro-firm.
💡 The My Virtual Compliance Advantage: We can provide a Client Categorisation Audit Template that automatically cross-references your client data with the new FOS thresholds, giving you a clear, compliant blueprint for applying the right level of protection to every client. Contact us for this.
Step 2: Implement a Risk-Based PROD Review Framework
The removal of the annual review mandate is perhaps the biggest time-saver, but you must replace the rigid deadline with a robust governance process.
How to Conform Practically:
- Develop a Policy: Create and formally approve a new Risk-Based Product Review Policy. This policy must define what factors constitute a high, medium, or low-risk product (e.g., product complexity, distribution channel, frequency of complaints, new market entry, or unstable pricing).
- Assign Frequencies: For every non-investment insurance product you distribute, the manufacturer must now determine and document an appropriate review cycle (e.g., 6 months for a high-risk product, 2 years for a stable, low-risk product). As a distributor, you must align with the manufacturer or ensure your own distribution reviews reflect this risk-based approach.
- Record Everything: Every decision about review frequency must be documented, alongside the supporting rationale (i.e., the risk factors considered). This documentation is your key evidence for the FCA.
💡 The My Virtual Compliance Advantage: Our PROD 4 Risk Assessment Toolkit provides a structured scoring model and pre-populated list of risk factors, allowing your compliance officer to assign a fully documented, justifiable review frequency in minutes, not days. Contact us for this.
Step 3: Shift Training from Hours to Outcomes
The removal of the minimum 15 hours of CPD gives you welcome freedom, but the underlying duty of competence remains paramount.
How to Conform Practically:
- Focus on Competence: Review your Training and Competence (T&C) scheme. The focus must now be entirely on ensuring employees have the necessary skills, knowledge, and expertise for their specific roles—especially those that involve direct client contact and adherence to the Consumer Duty.
- Targeted Development: Instead of generic CPD logs, implement targeted training based on identified gaps. For example, if your firm handles a high volume of vulnerable customers, your training must prove competency in identifying and supporting those customers.
- Simplify Record Keeping: Stop tracking hours. Start recording the purpose, content, and successful outcome of the training. A quick sign-off on a short, effective module is better evidence of competence than a long, irrelevant CPD certificate.
💡 The My Virtual Compliance Advantage: We help you transform your T&C framework, auditing your current training for relevance and providing simple Competency Assessment Templates that link training directly to SM&CR responsibilities and Consumer Duty outcomes. Contact us for this.
READ ALSO: SM&CR in 2026: 4 Key FCA Shifts UK Insurance Brokers Must Act On
Conclusion: Flexibility Demands Better Governance
PS25/21 is a landmark moment. It allows brokers to escape the “admin trap” and focus on innovation and growth. However, this regulatory freedom is granted under the expectation that you will adopt stronger, smarter, and better-documented internal governance.
My Virtual Compliance is here to ensure that you don’t trade compliance for complexity. We translate the FCA’s flexibility into clear, actionable, and ready-to-implement tools for your firm.
Ready to start simplifying your compliance processes today?
👉 Book a compliance check call with My Virtual Compliance to assess your firm’s readiness for the new PS25/21 rules and secure your new compliant templates.
