In Depth | October 2026
Consumer Duty proportionality: less duplication, not less accountability
The FCA’s proposals on Consumer Duty proportionality raise an important question for firms and their Boards:
When does proportionate implementation become an excuse for underinvestment, weak oversight or inadequate evidence?
For me, the boundary is clear.
Proportionality becomes underinvestment when a firm no longer has enough reliable information to understand the risks it controls, identify poor customer outcomes and take action.
Simplification should change the volume or form of regulatory activity. It should not weaken accountability.
When more evidence does not create better oversight
I have seen firms across distribution chains request extensive evidence from one another to demonstrate Consumer Duty compliance.
These requests are often highly prescriptive and duplicate information that the other firm already collects to evidence its own compliance.
The information may have been designed around that firm’s operating model, systems and data structure, taking account of its size, complexity, products and role in the customer journey. Requiring it to be reproduced in a different template does not necessarily make the resulting evidence better.
It can instead create a disproportionate amount of work as firms debate their respective roles, responsibilities and evidence requirements.
This has two consequences.
First, time and attention are diverted away from embedding the Duty and improving customer outcomes.
Second, the quality of the evidence can be compromised. Information becomes less useful when it is forced into a format that does not correspond with the systems from which it was derived.
Both the requesting and providing firm should therefore ask not only whether information has been exchanged, but how it will be used.
If the recipient cannot explain what decision the information supports, what risk it helps monitor or what action it might prompt, its collection may represent regulatory activity rather than effective oversight.
What the FCA is proposing
In CP26/23, the FCA recognises that the Consumer Duty has sometimes been applied more widely or intensively than intended, particularly across wholesale markets and complex distribution chains.
It proposes that firms should be able to place greater reliance on others, reduce duplication and apply the Duty according to their particular roles and ability to influence customer outcomes.
This is a helpful direction.
The FCA also proposes replacing references to “co-manufacturing” in the Consumer Duty rules and guidance with principal and secondary manufacturer roles.
Under the proposed approach, a firm with substantive control over the design or operation of a product or service would be a principal manufacturer. A firm that contributes to its design or operation without possessing that substantive control would be a secondary manufacturer.
The aim is to make responsibilities clearer and better aligned with the substance of the arrangement.
However, this requires an important qualification for insurance firms.
The continuing PROD 4 distinction
The FCA is not currently proposing to introduce the same terminology into PROD 4.
Its existing insurance product-governance framework, including its co-manufacturer provisions, would remain. CP26/23 expressly states that the FCA does not expect the proposed Consumer Duty classification to affect firms subject to PROD 4, although it asks whether similar changes should be considered in the future.
Insurance firms and intermediaries may therefore continue to navigate related regulatory frameworks using different terminology.
“Simplification should change the volume or form of regulatory activity. It should not weaken accountability.”
That creates a risk that a change intended to improve clarity at Consumer Duty level does not necessarily simplify the overall governance position for firms subject to PROD 4.
The labels matter less, however, than whether firms clearly understand the substance of their responsibilities.
In insurance arrangements, for example, different firms may contribute to product design, pricing, distribution, communications and the customer journey. The respective influence of an insurer, capacity provider, intermediary or distributor cannot always be determined from a label alone.
The practical task is to identify which firm genuinely controls each activity, what regulatory responsibilities follow and what evidence is needed to monitor the resulting customer outcomes.
A practical test for proportionality
A proportionate arrangement should allow every firm—and ultimately its Board—to answer three questions:
1. What do we control?
The firm should understand which elements of the product, service and customer journey it designs, operates or can materially influence.
Accountability should follow the reality of the arrangement, rather than relying solely on contractual descriptions.
2. What evidence do we need?
The firm should identify the information necessary to assess the outcomes arising from the activities for which it is responsible.
That does not mean collecting every available data point. It means obtaining sufficiently reliable evidence to identify emerging risks, test whether intended outcomes are being achieved and challenge apparent weaknesses.
3. What will we do if the evidence indicates harm?
Monitoring has little value unless the firm can act on what it finds.
Responsibilities for investigation, escalation and remediation should be clear. Firms should also understand what happens when addressing the problem requires action elsewhere in the distribution chain.
If a firm can answer these questions convincingly, simplification may be removing unnecessary friction.
If it cannot, proportionality may have become a convenient explanation for weak oversight or underinvestment.
Making accountability visible to the Board
Where responsibilities are shared, Boards need a clear view of:
the outcomes their firm can influence;
the responsibilities retained by the firm;
the areas in which it relies on another party;
the evidence supporting that reliance;
any limitations or gaps in available information; and
the action available when poor outcomes are identified.
A RACI—or an equivalent documented allocation of responsibilities—can help make this visible.
But it must accurately reflect how the arrangement works in practice. It should not be used to allocate accountability on paper to a firm that does not possess the corresponding decision-making authority, information or control.
The documented rationale is as important as the allocation itself. It allows the Board to understand why the arrangement is reasonable and enables the firm to explain its approach if challenged by the regulator.
How should successful simplification be measured?
A reduction in duplicative, low-quality data would be a positive outcome, particularly where firms currently reproduce the same information in multiple formats without a clear purpose.
But less data is not, by itself, evidence of successful simplification.
The real test is whether firms eliminate low-value activity while retaining a sufficiently clear and reliable line of sight to customer outcomes.
Boards should still be able to identify deterioration, understand its cause, challenge the responsible functions or firms and oversee an effective response.
Success should therefore mean:
less duplication;
clearer responsibilities;
better-quality information;
evidence aligned with each firm’s actual role and systems; and
no loss of the ability to identify and address customer harm.
Proportionate regulation should allow firms to adopt and document an approach that reflects how they operate and the control they have over customer outcomes.
It should not require line-by-line, tick-box activity that adds cost without improving protection.
But neither should proportionality become a justification for reducing investment to the point where accountability, evidence or the capacity to act is lost.
The objective should be less duplication—not less accountability.
Five Questions for the Board
1. Where is the Duty being applied more widely or mechanically than the underlying customer risk justifies?
2. Which information requests duplicate evidence that another firm already holds in a more useful form?
3. Can each firm explain what it controls, what evidence it needs and what it will do if harm emerges?
4. Does the Board understand where the firm relies on others and the evidence supporting that reliance?
5. What indicators would show that simplification had weakened the firm's ability to identify or address customer harm?
This article considers proposals contained in FCA Consultation Papers CP26/23 and, where relevant to insurance, CP26/22. At the time of writing, the proposals have not been made into final rules. The FCA expects to publish its final rules in Q1 2027.