Insurance firms are facing potential regulatory action over failures to provide good value or fair outcomes for their customers.

The Financial Conduct Authority said it was prepared to act if insurers failed to demonstrate products were providing fair value and were meeting industry rules.

In a new report, the authority said it had analysed information from 67 insurance and brokerage firms covering ten different products and found many insurers were failing to identify where products are unfair.

The authority also warned that “most” brokers “do not fully understand their responsibilities to consider” how their revenue streams interact “with the services and benefits they provide” and their value.

It said it was considering moves such as ordering the withdrawal of some products from the market, setting “action plans” for firms and senior managers to improve governance, and ordering formal regulatory investigations.

“Where we see failings have caused significant harm to customers, we will seek to make sure firms and their senior managers are held accountable for these failings and remediate the harm,” it said.

The review was in light of rules introduced in 2021 requiring insurers to ensure that their products provide fair value.

The authority has previously said it had seen evidence that certain car insurance policies “may be failing to provide fair value to customers”.

On Wednesday it said insurers and brokers had improved governance and oversight of how products were designed, managed, reviewed and distributed but that there were still “too many examples” of bad practice.

Last year it warned over so-called guaranteed asset protection, or “GAP”, products which are sold as an add-on to motor insurance to cover the difference between a vehicle’s purchase price and its current market value.

The regulator found that only 6 per cent of the amount customers pay in premiums was paid out in claims and it had “seen examples” of firms paying out up to 70 per cent of the value of insurance premiums in commission to partners including motor dealerships.