The Financial Conduct Authority's Mills Review, published 6 July 2026, concludes that artificial intelligence will become a defining force in retail financial services by 2030, bringing both significant opportunities and heightened risks that demand coordinated regulatory action. Led by executive director Sheldon Mills, the report is the first of its kind globally to be initiated by a regulator, and it signals that the insurance sector in particular will face a fundamental shift in how products are priced, claims handled and customers served.
The review identifies four major shifts reshaping the market. Firms' internal operations will transform, consumer journeys will evolve from static processes to dynamic, personalised interactions, competition and market power will redistribute, and the threat of fraud and cyber attacks will become more sophisticated. The FCA wants a proactive approach before these changes outpace existing safeguards.
Commissioned research shows that 11 million UK adults-roughly one in five-are already likely to use AI that can act autonomously within pre-set goals. This appetite for AI agents & automation in personal finance is tempered by a lack of trust: consumers want clear protection when things go wrong and the ability to reach a human when needed.
Insurance-specific challenges
For insurers, the review highlights several immediate concerns. The balance between human intervention and automated decisions on pricing, claims and compensation needs careful calibration. AI could move beyond blunt postcode-based underwriting, allowing insurers to price risk more accurately and reward responsible behaviour even in postcodes that carry higher general risk. But the sector has already seen how poor data or rigid automation causes harm: perfectly serviceable electric vehicles are being written off after minor battery damage, driving up premiums for all drivers.
The regulatory response
Sheldon Mills said the report "sets out a roadmap for how industry regulators and government can prepare for the next phase of AI-driven change in our world-leading financial services sector." The FCA is not proposing an immediate clampdown but instead wants to adapt its principles-based, outcomes-focused approach, leaning on the Consumer Duty and the Senior Managers Regime. For insurance firms, this means aligning AI for Insurance implementations with the Consumer Duty, so that automated underwriting and claims handling do not create foreseeable consumer harm.
FCA Chair Ashley Alder said: "His work anticipates the fundamental change agentic AI will bring to financial services. It highlights how consumers and firms can reap significant potential benefits as well how risks can be managed."
Industry reaction
James Towner, Chief Growth Officer at ArvatoConnect, argued that trust will determine whether the promise of AI materialises. "More than three-quarters of finance leaders believe their AI strategy could exclude vulnerable customers, yet only a quarter test their systems against real-life vulnerability and build clear routes to a human," he said. "The Review outlines what people want before they will trust AI with their money: clear protection when things go wrong and the ability to reach a human."
Greg B Davies, Head of Behavioural Finance at Oxford Risk, warned that scaling AI without deep client understanding could widen the advice gap. "The advice gap will not be closed by giving everyone a plausible-sounding chatbot. AI only improves outcomes if it is built around a genuine understanding of the client," he said. "Transaction data are useful, but they are not enough. They tell us what someone did, not whether they will panic, procrastinate, overreact, or need reassurance when markets fall."
Why this matters for insurance professionals
For underwriters, claims managers and compliance leads, the review makes clear that AI adoption cannot be a black box. They will need auditable logic trails, behaviourally informed models, and clear routes to human intervention when a claim involves financial vulnerability or emotive circumstances. The FCA's direction suggests that firms demonstrating proactive governance-testing algorithms for bias, documenting why an AI made a particular pricing or settlement decision-will be better positioned as the regulatory perimeter tightens.
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