The United Kingdom’s Financial Conduct Authority has started a review into how artificial intelligence shapes insurance markets and retail financial services over the long run.
The regulator said AI already alters how firms price risk and process claims, and the pace isn’t slowing.
Insurers increasingly rely on AI for continuous risk assessment and automated claims handling, according to the authority. Those uses are already material. The FCA sees deeper shifts ahead.
One area under scrutiny involves AI-driven agents. These tools could compare policies, suggest alternatives, and help customers switch providers with less friction.
Reduced inertia sounds consumer-friendly. It also disrupts pricing strategies built on stickiness.
Risk sits on the other side of the ledger. The FCA said AI enables more advanced fraud techniques and manipulation. Regulators and firms face pressure to respond as tools grow sharper and cheaper.
Sheldon Mills, who leads the review, said the aim is to stay ahead of the curve. He said a forward-looking approach supports innovation while keeping adoption safe and trusted across retail finance.
The review centres on three questions. How AI evolves next. What that evolution does to markets, firms, and consumers. And whether regulation keeps pace without breaking.
Wholesale markets fall outside the scope. Broader social effects sit largely outside as well, though the FCA said indirect links won’t be ignored where they matter.
The authority also plans to examine its own methods. AI could change how supervision works. The FCA said it isn’t drafting new prescriptive rules through this exercise. Instead, it plans to test whether current frameworks stretch far enough.
Findings will feed into recommendations for the FCA board when it meets this summer. Industry and other stakeholders have until Feb. 24 to submit views.
Alongside the FCA’s work, the Prudential Regulation Authority set out separate priorities for 2026.
Those include oversight of high-demand pension risk transfers, a semi-live crisis exercise scheduled for spring, and consultation on a new captive insurance regime.
