Soaring share prices for Aviva following increased costs
In the dynamic world of insurance, two significant developments have emerged. On one hand, the UK Financial Conduct Authority (FCA) is ramping up its oversight of contentious insurance practices, focusing on fair value, transparency, and proper governance. On the other, Aviva, a prominent FTSE 100 insurer, has reported impressive financial results for the first half of the year.
The FCA's recent initiatives include a comprehensive market study on insurance premium finance, launched in October 2024. Preliminary findings, released in July 2025, highlighted concerns about affordability, value, and transparency in motor and home insurance. The FCA is signalling ongoing scrutiny and potential future regulatory action to ensure fair value under its Consumer Duty framework.
Since 2020, the FCA has been addressing unfair pricing practices, such as 'price walking,' where loyal customers face higher renewal premiums than new customers. Remedies introduced in 2021 to enforce price parity and improve product governance are now being evaluated for effectiveness.
Another area of focus is commission and disclosure issues in freeholder insurance, where legal actions have targeted freeholders accused of unlawfully receiving secret commission fees. The FCA's findings revealed commission rates up to 62%, leading to new disclosure rules implemented in January 2024.
Under the Consumer Duty, fully in force since July 2024, firms are required to ensure products deliver good customer outcomes and maintain consumer-centric governance. The FCA is now actively supervising firms’ compliance, identifying areas needing improvement in fair value delivery, communication clarity, and distribution oversight.
Meanwhile, Aviva's financial results for the first half of the year do not include numbers from Direct Line, as the takeover was completed after the reporting period. Despite this, Aviva reported an impressive 22% increase in profits, boosted by strong growth in general insurance premiums. Sales in its health division also rose, and net flows into its wealth business increased by 16%. The integration of Aviva and Direct Line is "well under way."
Rival insurer Admiral also posted strong results, with a 69% increase in pre-tax profits, reaching £521mn. The rise in Admiral's profits was due to "pricing discipline." However, no specific information was provided about any changes in profits, operating numbers, or sales for Admiral's health division.
The industry has experienced some relief from pressure due to the rise in car insurance prices being primarily attributed to inflation, rather than "firm profits." Shares of Aviva rose 5% in early trading in London, reflecting investor confidence in the company's performance.
Notably, Aviva announced an increase of 10% in its interim dividend, demonstrating the company's commitment to shareholder returns. The UK financial watchdog, the Financial Conduct Authority, has also stated it will scrutinise a contentious practice for vetting customers. The car insurance prices have risen from 2022 to 2024 primarily because of inflation, rather than "firm profits."
In conclusion, the FCA's approach involves ongoing market studies, enforcement of transparency and fairness requirements, legal scrutiny of problematic commission practices, and elevated supervisory intensity under the Consumer Duty. Meanwhile, Aviva's strong results underscore its resilience and growth potential in the competitive UK insurance market.
- The Financial Conduct Authority (FCA) has expanded its oversight to include insurance premium finance, expressing concerns about affordability, value, and transparency in motor and home insurance, aiming to ensure fair value under its Consumer Duty framework for the benefit of personal-finance management.
- Despite the ongoing scrutiny from the FCA, some UK insurers, like Aviva, are thriving in business, reporting impressive financial results, such as a 22% increase in profits, owing to their smart investing strategies and a strong growth in general insurance premiums, boosting investor confidence.
- In the realm of finance, the FCA is taking action against questionable commission practices in freeholder insurance, introducing new disclosure rules to maintain transparency and standards, benefiting both businesses and personal-finance systems.
