With the UK’s top insurance brokers facing shifting market conditions, there is no better time to reassess the commercial, regulatory, and technological pressures shaping the sector. Brokers that take a structured approach will not only navigate these pressures more effectively but will be better placed to take advantage of the opportunities that emerge alongside these challenges.
Insurance Partner Paul Goldwin and Director Charles Drew consider the areas of focus and the importance of discipline for the UK insurance broking market to position for the year ahead.
Operational efficiencies
Soft market rates continue to squeeze broker margins across many classes of businesses while wider macroeconomic and fiscal pressures add strain to operating cost bases for firms. Even as inflation eases, these trends are reinforcing competitive pressures and pushing cost mitigation strategies to the top of agendas for broker leadership teams.
Unsurprisingly, we are seeing firms strengthen underwriting discipline to protect book profitability through a clear and detailed review of governance frameworks, increased monitoring and analysis of loss ratios, and more frequent and proactive insurer engagement. Together, these steps help demonstrate control and stability despite the challenging market conditions that firms are facing.
Many firms are utilising alternative distribution strategies, such as through MGA platforms, as the demand for operational efficiency grows. At the same time, brokers are developing innovative uses for AI to take advantage of the operational efficiencies available. As AI adoption expands, its implementation and governance are becoming critical commercial metrics.
We also expect market conditions to continue to promote a dynamic market for broker M&A with both consolidators and new entrants looking to build capabilities and attract and retain specialist talent.
The challenge of AI
We expect to see further implementation of AI into core workflows this year to enhance access and distribution. With this acceleration, firms must move from adoption to responsible and well governed deployment. However, scaling AI safely requires strong governance, especially as the FCA reiterates its principles‑based approach and aligns closely with the UK government’s broader AI regulatory framework. The recent launch of the FCA’s review into the potential impact of AI on retail financial services markets and consumer behaviour signals concern.
This regulator’s approach highlights opportunities for firms to reduce operating costs, achieve better process efficiency and improved risk management while maintaining fairness, accountability, and good customer outcomes. Implementing a policy that meets these AI governance principles is now a necessity to enable firms to significantly increase their AI use in an innovative yet responsible way.
This may prove easier said than done for many brokers where legacy systems inherited through acquisition are still in operation. Legacy systems and associated data management and reconciliation issues have always caused headaches for firms and will likely limit the possible efficiency gains offered by AI unless systems can be integrated and rationalised quickly and effectively.
Cyber resilience also remains high on the agenda after several high‑profile incidents in 2025. Regulatory guidance from the Bank of England, PRA and FCA highlights the need for stronger response and recovery capabilities, better testing and clearer lines of accountability. For brokers, the expectation is clear that cyber resilience must be integral to operational resilience.
Regulatory scrutiny
Despite political pressure to simplify FCA rules, changes to date – such as the reduced complaints reporting process – appear to be minimal and offset with more intense overall regulatory scrutiny.
Most recently, governance and risk management frameworks have been targeted with increased operational resilience requirements for third party oversight, including for Appointed Representatives and outsourcing arrangements, as well as increased supervision to ensure firms promote a healthy culture in the light of conduct failures.
Specifically, non-financial misconduct will now be seen as a regulatory breach, rather than an HR issue – a major shift confirming culture and conduct as supervisory matters.
Financial resilience measures are also receiving greater focus with TC2.4 and wind-down planning in scope for FCA firm reviews and ad hoc inspections to reiterate these assessments are compulsory for all FCA solo regulated firms and not just a ‘nice to have’. Where necessary and where firms have not demonstrated their own specific wind down requirements, the FCA is imposing its own requirement, usually amounting to three months’ worth of ‘fixed overhead expenditure’, thereby requiring firms to lock-in capital that could be better used elsewhere.
With a variety of further market studies underway, it seems more likely that the regulator will continue to increase oversight in 2026.
What does this mean for my business?
With rate pressures and increasing competition, accelerating technological change, and regulatory scrutiny, firms will need operational resilience, financial control, and technological readiness as a foundation for growth.
For the UK’s largest insurance brokers, the message is clear: firms with disciplined systems and robust control environments will benefit from these pressures in 2026.
This article was originally published by Insurance Age, where our experts discussed the key pressures shaping the UK insurance broking market.
