FCA Consumer Duty: What It Actually Means for Claims Operations in 2026

From Guidance to Enforcement: The 2026 Compliance Reality

When the FCA introduced Consumer Duty in July 2023, most UK insurers treated it like previous regulatory updates—acknowledge the requirements, update some policies, hope the existing processes are close enough. The initial implementation period came and went with relatively little enforcement action.

That grace period is over.

The FCA's 2025/26 Business Plan makes it explicit: Consumer Duty has shifted from guidance to active enforcement priority. Supervisory visits now include detailed claims file reviews. Thematic reviews are identifying firms with weak evidence of fair customer outcomes. And the first enforcement actions are being prepared against insurers who failed to operationalize the principles.

For claims operations, this means the bar has moved from "can you explain your processes?" to "can you prove your outcomes are fair with actual data?"

The FCA's 2025/26 priorities specifically call out claims handling as a key area of focus for Consumer Duty enforcement, particularly around settlement fairness and communication quality.

What "Fair Customer Outcomes" Actually Means in Claims

The principle sounds straightforward: deliver fair outcomes for customers. But translating that principle into measurable claims operations creates challenges most insurers haven't fully solved.

The Four Outcomes the FCA Expects Evidence For

The FCA has made clear they expect firms to demonstrate fair outcomes across four specific areas. For claims operations, here's what that looks like:

1. Price and Value

In claims context, this isn't about premium—it's about settlement value. The FCA expects you to prove settlements are fair relative to policy coverage. This means being able to show:

• Settlement amounts are consistent with policy terms
• Similar claims receive similar settlements (no unexplained variation)
• Customers aren't systematically underpaid relative to their valid claims
• Deductions and depreciation are applied consistently and fairly

This requires data you can analyze. You can't prove fair settlement values if you can't pull settlement data, compare across similar claims, and identify outliers.

2. Products and Services

The claims process itself is a service. The FCA wants evidence that your claims handling meets customer needs, which means demonstrating:

• Claim processes are accessible to vulnerable customers
• Turnaround times are reasonable and consistent
• Customers can easily provide information and track progress
• The process doesn't create unnecessary barriers to settlement

3. Consumer Understanding

Customers need to understand claim decisions. This isn't about legal jargon disclaimers—it's about clear communication explaining:

• Why a claim was paid, reduced, or declined
• What specific policy terms apply to their situation
• What information is needed and why
• What happens next in the process

The FCA is looking at actual customer communications to assess whether they genuinely aid understanding or just satisfy technical disclosure requirements.

4. Consumer Support

This is about meeting the needs of vulnerable customers and those requiring extra support. Evidence needs to show:

• Identification of vulnerable customers during claims
• Appropriate adjustments made to support their needs
• Staff training on vulnerability and appropriate responses
• Outcomes for vulnerable customers are fair compared to general population

The Evidence Problem: What Regulators Actually Ask For

During supervisory visits and thematic reviews, the FCA isn't asking for your policies and procedures documents. They're asking for evidence that those policies are working in practice.

What a Typical FCA Review Request Looks Like

Based on recent supervisory visits, here are actual questions insurers are being asked about their claims operations:

• "Provide settlement data for all claims in the last 12 months showing settlement amount vs. claimed amount with explanations for variances over 20%"
• "Show us how you identify vulnerable customers during claims intake and what adjustments were made in specific cases"
• "Demonstrate that customers with similar claims are receiving similar settlements—provide analysis showing settlement consistency"
• "Pull sample customer communications and explain how they meet Consumer Duty requirements for understanding"
• "Show turnaround time data by claim type and explain any outliers that exceeded your target timelines"

Notice the pattern: these aren't questions about what you intend to do. They're requests for data proving what you actually did.

Firms that can't produce this evidence within days of an FCA request are being flagged for follow-up enforcement action. The ability to generate evidence quickly has become a compliance requirement itself.

The Manual Operations Compliance Gap

For claims operations running on manual processes, email-based workflows, and spreadsheet tracking, producing this evidence is nearly impossible without weeks of work. How do you:

• Compare settlements across "similar claims" when similarity isn't coded into your data?
• Pull communication records when they're scattered across email threads?
• Identify vulnerable customers retroactively when vulnerability isn't systematically flagged?
• Demonstrate process consistency when each adjuster has their own workflow?

The firms struggling most with Consumer Duty compliance aren't those with unfair processes. They're those with processes that might be fair but can't be proven to be fair with data.

Building Compliance Into Operations (Not Adding It On Top)

The traditional approach to regulatory compliance is to build business processes first, then add compliance controls afterward. Consumer Duty doesn't work that way. Fair outcomes need to be baked into operations from the start.

Automated Audit Trails: Compliance as a Byproduct

The most effective approach to Consumer Duty compliance is to make evidence generation automatic. When your claims platform automatically captures:

• Who made each decision and when
• What information was available at decision time
• How settlement amounts were calculated
• What communications were sent to customers
• Where delays occurred in the process

Then regulatory evidence becomes a reporting exercise rather than a research project. You're not reconstructing what happened—you're querying data that was captured as a natural part of operations.

Modern audit trail systems create compliance evidence automatically without requiring adjusters to do extra documentation work. The system logs activity as it happens, creating a complete record that serves both operational and regulatory purposes.

Settlement Analysis and Fair Value Metrics

Proving fair settlement value requires comparing settlement data across similar claims. This is impossible to do manually but straightforward with proper data structure.

Effective systems enable you to:

• Group claims by type, severity, coverage, and other relevant factors
• Calculate settlement ratios (paid vs. claimed amounts) across groups
• Identify outliers where settlements deviate from patterns
• Drill down into specific claims to understand variance reasons
• Generate reports showing settlement consistency over time

This isn't complex analytics. It's basic data comparison that becomes possible when claim data is structured and accessible rather than trapped in narrative notes.

Vulnerability Flags and Support Documentation

Consumer Duty expects you to identify vulnerable customers and adjust processes accordingly. But "identify" and "adjust" require systematic tracking.

Effective vulnerability management means:

• Prompting adjusters to assess vulnerability during intake
• Recording specific vulnerability factors (not just yes/no flags)
• Suggesting appropriate adjustments based on vulnerability type
• Documenting what adjustments were actually made
• Tracking outcomes for vulnerable customers separately

This can't be a separate compliance exercise. It needs to be integrated into the normal claims workflow so it happens consistently without creating extra work.

What UK MGAs and TPAs Are Getting Wrong

Managing General Agents and Third-Party Administrators face unique Consumer Duty challenges because they're often processing claims on behalf of multiple insurers with different approaches to compliance.

The "We're Just Processors" Misconception

Some MGAs and TPAs have assumed Consumer Duty primarily applies to the insurer, not the claims handler. The FCA has made clear this is wrong. If you're making claims decisions or handling customer communications, Consumer Duty applies to you.

This means MGAs need to demonstrate fair outcomes in their claims handling even when they're working under delegated authority. You can't defer compliance responsibility to the insurer whose paper you're writing.

The Multi-Insurer Data Challenge

MGAs processing claims for 5-10 different insurers face a data aggregation problem. Each insurer might have different:

• Reporting requirements for Consumer Duty evidence
• Definitions of what constitutes a "similar claim"
• Standards for settlement ratios and turnaround times
• Communication templates and vulnerability protocols

If your systems are built around individual client requirements rather than unified data standards, producing compliance evidence becomes exponentially harder as you scale.

Over 50% of MGAs report they're not confident they could produce Consumer Duty evidence for all their clients within the FCA's typical 48-hour request window. This represents significant regulatory risk.

The 2026 Enforcement Pattern: What's Happening Now

While the FCA hasn't published major Consumer Duty enforcement actions yet, the pattern emerging from supervisory visits shows where enforcement is heading.

Three Red Flags That Trigger Regulatory Action

Based on FCA communications and industry reports, three issues are consistently flagging firms for enhanced supervision:

1. Unable to Produce Evidence of Fair Outcomes

Firms that can't quickly produce settlement analysis, turnaround time data, or customer communication records are being escalated. The inability to generate evidence is being treated as evidence of poor controls.

2. Systematic Variation in Settlements Without Clear Justification

When settlement ratios vary widely across similar claims without documented reasons, regulators assume unfair treatment. Firms need to either show consistency or explain legitimate reasons for variance.

3. Weak Vulnerability Identification and Support

Claims operations with no systematic approach to identifying vulnerable customers or documenting support provided are being challenged. "We handle it case-by-case" isn't adequate without evidence of what that means in practice.

Implementation: Making Operations Compliance-Ready

Moving from compliance-by-policy to compliance-by-evidence requires operational changes, not just documentation updates.

The 90-Day Compliance Upgrade Path

For operations needing to get compliant quickly:

Month 1: Data Structure and Capture

• Implement structured claim data fields that enable comparison
• Add vulnerability assessment to intake workflow
• Ensure settlement calculations are documented, not just results
• Centralize customer communications for searchability

Month 2: Audit Trails and Monitoring

• Turn on automatic logging of claim decisions and timing
• Create dashboards showing settlement ratios and turnaround times
• Establish outlier alerts for claims that deviate from patterns
• Document process adjustments for vulnerable customers

Month 3: Evidence Generation and Testing

• Run test queries simulating FCA evidence requests
• Identify gaps where evidence can't be produced
• Create templates for common regulatory reporting
• Train team on compliance evidence requirements

This isn't a project that requires replacing core systems. It's about adding the data capture and reporting layer that makes compliance evidence accessible.

The Real Compliance Test: Can You Answer These Questions Right Now?

Here's the practical compliance check. If an FCA supervisor asked these questions tomorrow, could you produce answers within 48 hours?

• "Show me settlement data for your last 200 property damage claims with settlement ratios and variance explanations"
• "How many vulnerable customers did you identify in claims last quarter and what specific support was provided?"
• "Pull 10 random claim files and show me the complete audit trail from intake to settlement"
• "What's your average turnaround time by claim type and what percentage exceed your target?"
• "Demonstrate that your decline decisions are consistent with policy terms and communicated clearly"

If the answer to any of these is "we'd need a few weeks to compile that," you have a compliance gap that needs addressing before the FCA comes asking.

Consumer Duty in 2026 isn't about having the right policies. It's about having operations that generate fair outcomes and systems that prove it with data. The firms that have made that shift are ready for enforcement. The ones still running on manual processes and hoping for the best aren't.