In the first three months of 2025, the regulator authorised just two new general insurance brokers. Several existing firms folded in the same period. Trade body BIBA called it "the canary in the coal mine" for a sector that, by its own estimate, contributes around £100 billion to the UK economy and employs more than 100,000 people.
The question for insurance is whether the regulator's promise to strip back red tape is actually reaching smaller brokers, or whether it is simply rearranging the paperwork. BIBA has already urged the Chancellor to ease the regulatory burden on insurance brokers, arguing that the cost and complexity of regulation are becoming barriers to growth.
The Financial Conduct Authority insists it is listening. In December 2025 it published its policy statement on simplifying insurance rules, part of a wider programme that will strip more than 100 pages of insurance regulation from its Handbook.
The changes give insurers and brokers greater discretion over how often they review products and how many hours of continuing professional development staff must complete, alongside the removal of three insurance data returns.
The reform sits within a wider drive, first floated in a 2024 discussion paper and formalised in Consultation Paper CP25/12, to draw a sharper line between sophisticated commercial clients, deemed capable of looking after themselves, and ordinary retail customers, who retain the rulebook's full protection.
But simpler does not necessarily mean fewer rules. The FCA has previously told the House of Lords Financial Services Regulation Committee that its focus remains on outcomes rather than simply reducing prescriptive requirements.
The view looks rather different from the perspective of brokers who have recently set up businesses of their own.
Alan Tate-Smith, director at AMB Rural & Commercial, operates as an appointed representative of an existing authorised broker rather than holding direct FCA authorisation. For a small start-up, he said the latter was simply not a practical option.
"I operate as an Appointed Representative of an existing broker rather than being directly authorised," Tate-Smith said. "Realistically there is no way a small start up brokerage like mine could practically get authorisation directly from the FCA, the process was painful enough going through an existing firm with a full time compliance team!"
The AR structure gives him support and access to markets, although Tate-Smith said that comes at the cost of giving up a significant proportion of his commission.
Martin Castleton, managing director at Aureum Insurance, also chose the AR route. His concern was not only the FCA process, but the economics of getting a directly authorised brokerage trading. He estimated authorisation and establishing insurer agencies could take six to nine months, while low initial volumes could leave a new entrant with lower-commission agency arrangements.
Castleton saw two options: buy an existing broker with FCA authorisation or, as he did, become an appointed representative.
"The AR model 100% suits me as they deal with all the back office, FCA, Accounts, Broking and insurers which leaves me focused on my business, my staff and my clients," Castleton said. "I would never consider going directly authorised in the current market."
Their experiences add important context to those two new authorisations. A lack of directly authorised entrants does not necessarily mean brokers have stopped setting up businesses. Tate-Smith and Castleton both did exactly that, but neither believed direct authorisation made practical or commercial sense.
Their experiences also highlight barriers that sit beyond the FCA rulebook itself. A start-up may need compliance capability before it has scale, while Castleton's experience shows that securing insurer agencies on attractive terms can present another challenge. The AR model shifts much of that burden elsewhere, but Tate-Smith's experience shows that support comes at a commercial cost.
The FCA's second-phase consultation on simplifying its insurance rulebook closed for responses on 4 September, two days after the Lords hearing. A separate consultation narrowing the Consumer Duty's reach for genuinely overseas wholesale business closed on 18 September.
A further policy statement is expected in early 2027, although that timetable comes from legal commentary on the proposals rather than the FCA itself and could yet shift.
The direction of travel is towards less prescriptive, more outcomes-focused regulation. But less prescriptive is not the same as less demanding. Firms still need to evidence outcomes and justify fair value, potentially with less black-and-white guidance to fall back on.
The experience of brokers entering the market provides another measure of whether simplification is working. Tate-Smith and Castleton both wanted to build their own businesses and found a route to do it, but neither chose direct authorisation.
If one aim is to make Britain an easier place to start and grow an insurance business, the test may not be how many pages disappear from the FCA Handbook, but whether the next generation of broker founders believes direct authorisation is a realistic choice.
