Three Years In, Enforcement Is No Longer Theoretical
It will soon be three years since the Consumer Duty came into force in July 2023. From the outset, the FCA was explicit that firms would be given time to embed it before facing enforcement action. That grace period is over. In Enforcement Watch 2, published 7 July 2026, the FCA confirms it opened its first Consumer Duty investigation in August 2024 and that the number has “steadily increased” since. The regulator now has 11 open investigations, up from the six disclosed in the first edition of the newsletter.
The FCA is also drawing a clearer line between supervision and enforcement. Last financial year it intervened 382 times through what it calls “assertive supervision”, ranging from a conversation with a firm through to formal requirements such as Voluntary Requirements (VREQs) and Own Initiative Requirements (OIREQs). Enforcement investigations are reserved for cases where supervision alone will not resolve the harm, or where the FCA judges that a formal, potentially public outcome is needed to deter similar conduct elsewhere in the market.
For firms in regulated insurance distribution, the practical takeaway is that the threshold for scrutiny has dropped. A firm no longer needs to wait for a formal investigation to feel the weight of the Duty. Interventions, skilled person reviews (the FCA has now commissioned around 30 that reference the Duty) and multi-firm thematic reviews are all live tools the regulator is using well before enforcement becomes necessary.
Inside the 11 Open Investigations
The FCA has been unusually specific about where its current investigations sit. They span wealth management, peer-to-peer lending, a small IFA, several insurance firms and two claims management companies operating in the motor finance sector. Two of the investigations, into claims management firms, have been made public deliberately, so that affected customers can consider their own options for redress.
Across nearly all 11 cases, a common thread emerges: fair value under PRIN 2A and the PROD rules. The FCA is explicit that fair value is not simply about price. A product that does not meet the customer’s needs, causes foreseeable harm, or frustrates their objectives can fail the fair value test regardless of what it costs. Several investigations are also examining whether firms properly assessed how the price paid compared to the overall benefit received, and whether products were designed with the right target market in mind from the outset.
This broader pattern matters because it shows the FCA is not treating the Duty’s four outcomes (products and services, price and value, consumer understanding and consumer support) as separate checkboxes. A weakness in one area, such as unclear product design, tends to surface problems in another, such as consumer support when something goes wrong. Firms assessing their own Duty exposure need to look at the whole customer journey, not isolated touchpoints, a theme REG has written about previously in the context of fair value data challenges.
Where Insurance Firms Are Under the Spotlight
Five of the 11 open investigations sit directly in insurance, and the detail the FCA has published is worth taking seriously.
Two investigations concern operational and oversight failures. In both cases, the FCA found that weaknesses stopped consumers accessing their own account information and delayed the handling of complaints. These were serious and ongoing enough that the FCA’s supervision team referred them directly to enforcement, rather than resolving them through intervention alone.
Three further investigations followed a multi-firm review into home and travel insurance claims handling. The review identified delays, high rejection rates, inconsistent outcomes, and complaints that were missed entirely. All three investigations are also examining fair value directly, including whether the products in question ever met the customer’s needs and objectives in the first place. The FCA specifically flags that vulnerable customers may have experienced heightened and foreseeable harm as a result.
A sixth case, separate from the group of five, concerns a travel insurer accused of “hollowing out” a product, reducing its features over time while presumably maintaining its price and marketing position. The FCA opened a full enforcement investigation specifically because of the seriousness of the practice, and because a public outcome would help deter it elsewhere in the market.
None of this is abstract policy. It is claims handling, complaints processes, and product design, the operational backbone of any insurer, MGA or broker relationship. And in each case, the underlying question the FCA keeps returning to is whether the firm had genuine oversight of what was actually happening to its customers.
The Distribution Chain Is Getting a Formal Definition
Enforcement Watch 2 lands alongside a separate but closely connected development. On 29 June 2026, the FCA published CP26/23, a consultation proposing changes to how the Consumer Duty applies to wholesale and distribution chain activity. The consultation is open until 18 September 2026.
The most significant proposal is a new formal definition of a “distribution chain”: firms that carry on one or more retail market business activities in relation to the same product. The FCA has also published a non-exhaustive list of the kinds of arrangements that can bring a firm into a chain, including outsourcing relationships, joint ventures, and commercial distribution agreements between manufacturers and distributors. In practice, this widens rather than narrows the scope of who might be considered part of a chain, even as it tries to bring more precision to the concept.
For insurance distribution specifically, where cover typically passes from insurer to MGA to broker to policyholder, this matters. Under the proposed rules, each firm in that chain retains an obligation to understand its role and its influence over customer outcomes, even where it can show that role is limited. The days of assuming that due diligence carried out at the top of a chain automatically covers everyone underneath it are numbered, if they were ever safely assumed at all.
Why Chain Visibility Is Becoming the Compliance Battleground
Read together, Enforcement Watch 2 and CP26/23 tell a consistent story. The FCA’s insurance investigations are largely about firms that could not see, track, or evidence what was happening to their customers further down the chain, whether that was a claims process, a complaint, or a product’s actual features once it reached the end customer. And the regulator’s own proposed reforms are explicitly trying to sharpen what a distribution chain is and who sits inside it.
This is precisely the operational gap REG Exchanges is built to close. Its Chains capability gives firms end-to-end visibility of every relationship in their distribution network, rather than just the counterparty directly in front of them, tracking documentation, TOBAs, fair value assessments and compliance declarations in one place instead of scattered across email threads and shared drives. Across the wider REG Network, this kind of oversight already generates more than 35,000 operational alerts every month, covering 24,000+ counterparties in 191 countries, so when something changes further down a chain, firms are notified rather than finding out during an audit or, worse, an investigation.
“Most firms we speak to did their due diligence properly when a relationship started. The gap is what happens twelve months later, when a broker’s circumstances have changed and nobody has been told. That is the part of the Consumer Duty that catches firms out, not the initial check, but the absence of anything after it. Continuous visibility across the chain is not a nice to have anymore, it is what the FCA is now actively testing for.”
Sandra Simões, Head of Product, REG Technologies
To be clear on the limits here: REG supports compliance oversight and gives firms the visibility and audit trail the Duty increasingly demands. It does not replace the judgement calls the FCA is testing for in these investigations, whether a product met its target market’s needs, or whether a complaint was handled fairly. That responsibility sits with the firm.
How Arc Legal Group Manages Distribution Chain Oversight
Arc Legal Group, an MGA and a verified REG customer, has spoken directly to this challenge. Sean Kilbourn, Director of Business Control & Governance at Arc Legal, describes how REG’s platform has changed the way the firm manages risk across its own distribution chain.
“We have used REG’s services for several years now and it has improved our ability to efficiently manage the legal and statutory risks throughout our distribution chain. The online platform allows us to retain all of our third-party information in one place and is easy to manage. REG enables us to undertake simple and speedy onboarding due diligence, the email alerts provide us with real time ongoing monitoring ensuring our oversight accurately reflects our third-party partners’ current position.”
Sean Kilbourn, Director of Business Control & Governance, Arc Legal Group
The value here is not that the platform makes decisions for Arc Legal. It is that the firm has continuous, current visibility of where its third parties stand, which is exactly the kind of evidence the FCA’s insurance investigations suggest many firms are currently missing.
REG’s View: Building for a Tougher Enforcement Environment
Stephen Line, Chief Executive Officer of REG Technologies, sees Enforcement Watch 2 as confirmation of a direction the market has been moving in for some time.
“Eleven investigations tells you the FCA is not easing off, it is getting more specific about where the harm actually sits. For insurance leaders, the honest response is not to treat this as another compliance burden to absorb. It is a reason to get real oversight of the distribution chain in place, so that governance stops being a defensive exercise and starts being something you can stand behind with confidence, in front of a regulator, a board, or a customer.”
Stephen Line, Chief Executive Officer, REG Technologies
Enforcement Watch 2 is not a warning about future risk. It is a record of live investigations, most of them concentrated in exactly the operational areas, claims handling, complaints, product oversight, where visibility across a distribution chain matters most. The FCA’s parallel consultation on formally defining that chain only sharpens the point: firms will increasingly need to show, not assert, that they understand their role and their counterparties’ conduct at every link. For insurers, MGAs and brokers still relying on email chains and spreadsheets to track that information, closing the visibility gap before the next Enforcement Watch is published is the more comfortable way to find out where it stands.
