Insurance companies could face regulatory actions for failing to deliver good value or fair outcomes to their customers.

The Financial Conduct Authority (FCA) announced its readiness to intervene if insurers cannot prove their products provide fair value and adhere to industry regulations.

According to a new report, the FCA reviewed data from 67 insurance and brokerage firms across ten different products, revealing that many insurers are struggling to identify unfair products.

The FCA also highlighted that “most” brokers “lack a complete understanding of their duties regarding how their revenue streams align with the services and benefits offered” and their value.

Potential actions being considered include withdrawing certain products from the market, developing “action plans” for companies and senior managers to improve governance, and initiating formal regulatory investigations.

“Where failings cause significant customer harm, we will ensure firms and their senior managers are held accountable and remediate the harm,” the FCA stated.

This review follows the implementation of 2021 rules requiring insurers to ensure their products offer fair value.

The FCA had previously indicated that some car insurance policies “may not provide fair value to customers”.

While insurers and brokers have shown improvements in governance and oversight of product design, management, review, and distribution, there are still “too many instances” of poor practice, the FCA noted.

Last year, concerns were raised over guaranteed asset protection (GAP) products, which supplement motor insurance to cover the gap between a vehicle’s purchase price and its current market value.

The regulator discovered that only 6% of customers’ premium payments were returned in claims, with some firms allocating up to 70% of premium value in commissions to partners, including motor dealerships.