For an MGA, PROD 4 compliance starts with a question that is easy to overlook: what role does the MGA actually perform in manufacturing and distributing each insurance product? The commercial description "MGA" does not answer that question. An insurance intermediary can itself be a manufacturer where its actual decision-making role in designing and developing the product meets the FCA test, while the same firm may act primarily as distributor for another product.
That distinction matters because manufacturer status brings responsibility for the product approval process, target market, testing, fair value, distribution strategy and continuing product review. Where an insurer and MGA both influence design, the respective responsibilities also need to be clear and documented. A product governance framework is weak if the written allocation says one thing while commercial decision-making operates differently in practice.
The FCA's current approach makes evidence particularly important. Its product governance work has repeatedly found firms that had policies and value assessments but could not demonstrate convincingly that products provided fair value or that distribution arrangements were being monitored effectively. For an MGA in 2026, PROD 4 therefore needs to operate as a management system that changes products and distribution when customer evidence indicates a problem, not simply as a set of documents maintained for compliance purposes.
When is an MGA a manufacturer under PROD 4?
PROD 1.4 requires an insurance intermediary to consider the substance of its role. An intermediary is treated as a manufacturer where an overall analysis shows that it has a decision-making role in designing and developing an insurance product for the market. The FCA specifically points to situations where the intermediary autonomously determines essential features and main elements such as coverage, price, costs, risk, target market and relevant customer rights, and those features are not substantially modified by the insurer providing the cover.
For many MGAs this is highly relevant because delegated underwriting arrangements can extend well beyond accepting risks within parameters designed by somebody else. An MGA may develop the underlying scheme, determine material coverage and exclusions, influence pricing, decide underwriting appetite and shape the intended broker distribution. Where that happens, management should not assume the insurer is the sole manufacturer simply because it supplies capacity.
The analysis should be performed at product level. An MGA may have substantial manufacturing responsibility for one scheme while acting mainly as distributor for another product designed by the insurer. A firm-wide statement that "the MGA is a distributor" or "the MGA is a co-manufacturer" can therefore be too crude if the commercial reality varies across products.
Where more than one firm is involved in manufacture, PROD requires the respective responsibilities to be addressed through the applicable written arrangements. The lead manufacturer option introduced in December 2025 can simplify responsibility for qualifying non-investment insurance products where its conditions are met, but an insurance intermediary cannot itself act as the lead firm. Where the MGA has designed the main aspects of the product, firms need to consider carefully whether the conditions for the lead option are available or whether the ordinary co-manufacturer framework applies.
Product approval should challenge the proposition before launch
The product approval process should be part of developing the product, rather than a compliance exercise carried out after the commercial proposition has effectively been agreed. For each product within scope, management should be able to explain why it exists, which customer needs it addresses, who it is intended for and what foreseeable risks could prevent it from delivering the expected benefit.
The target market and product testing should reflect the actual complexity of the proposition. A specialist insurance scheme with significant exclusions, unusual eligibility criteria or a complex claims process deserves more analysis than a straightforward product with a relatively simple customer proposition. Product governance should be proportionate, but proportionality should affect the depth of the work rather than whether the underlying questions are addressed at all.
Product testing should also challenge how the product is likely to operate in real customer scenarios. Cover, exclusions, limits, excesses and claims operation can all affect whether the product meets the needs of the intended market. The objective is not to predict every possible claim, but to establish before launch that the product is capable of producing the outcomes on which the commercial and regulatory case depends.
The approval record should preserve the reasoning behind the decision. If the product team changed an exclusion, pricing assumption or distribution channel because of compliance challenge, that is useful governance evidence. A sequence of approvals containing little more than confirmation that all required documents exist is substantially less informative.
Target market must influence who actually receives the product
A target-market statement is only useful if it changes product and distribution decisions. Very broad descriptions such as "UK SMEs" or "customers requiring motor insurance" may provide little practical guidance where the product is designed for a narrower group or includes features that make it unsuitable for particular customers.
The target market should therefore reflect the needs, objectives and characteristics that informed the design of the product. It should also help distributors understand circumstances in which the product is unlikely to be appropriate. This is separate from the individual demands and needs assessment at the point of sale, but the two should operate coherently rather than point in different directions.
For an MGA distributing through brokers, the important test is whether target-market information reaches the firms making distribution decisions in a form they can actually use. Sending a lengthy manufacturer document once at onboarding is not necessarily enough if brokers cannot translate it into their sales process. Product information needs to be sufficiently clear for the distributor to understand the customers for whom the product has been designed.
Actual distribution then becomes an important source of evidence. If a material proportion of customers repeatedly falls outside the intended target market, the MGA should understand why. The issue may be broker behaviour, but it may also indicate that the target market is poorly defined or the intended distribution strategy no longer reflects how the product is being sold.
Fair value needs to be built into product design
For relevant non-investment insurance products, PROD requires manufacturers to identify whether the product provides fair value to customers in the target market and to be able to demonstrate that conclusion. Value is the relationship between the overall customer price and the quality of the product and associated services, which makes the assessment materially broader than comparing technical premium against competitor prices.
The MGA should understand the proposition the customer actually receives. Depending on the distribution model, the final cost may reflect MGA remuneration, broker commission, customer fees, ancillary products and retail premium finance as well as the insurer's underlying risk price. Those additional costs do not automatically make the product poor value, but the firm needs to understand what benefit accompanies them and whether the overall relationship between price and quality remains reasonable.
Product quality also requires substantive assessment. Coverage, significant exclusions, limits, claims experience and service quality can all affect the benefit customers receive. A comparatively inexpensive policy can provide poor value if customers have little realistic prospect of receiving meaningful benefit, while a more expensive specialist product may still provide fair value where the breadth and quality of the protection support the price.
Since 26 June 2026, PROD expressly requires value considerations to be considered throughout the relevant product approval process, including target-market identification, product testing and selection of distribution channels. This is an important practical change in emphasis. The firm should not design the product, agree the economics and choose the distribution route before asking compliance to justify value afterwards.
Distribution strategy and remuneration require active oversight
An MGA manufacturer needs an intended distribution strategy that is appropriate for the product and target market. For relevant non-investment insurance products, the firm also needs to consider whether its distribution arrangements could adversely affect the value delivered to customers. This makes distribution a regulatory design decision as well as a commercial one.
Broker remuneration deserves particular attention because it can increase the total price paid by the customer. PROD requires manufacturers to obtain necessary and relevant information about remuneration within distribution arrangements so that ongoing value can be assessed. The analysis should consider the services provided through the chain, not simply the percentage or absolute amount of commission.
The same principle applies where another party has discretion over the final customer price. A net-rated arrangement does not remove the manufacturer's need to understand whether final pricing remains consistent with fair value. Where customer prices vary materially across brokers or channels, management should know whether the variation is explained by genuine differences in service, risk or distribution benefit.
Broker oversight should therefore produce information that product governance can use. Complaints, unusual pricing, target-market exceptions, claims patterns or persistent failures to provide required information can indicate that a distribution channel needs further review. The MGA does not need to manage an independent broker as if it were an employee, but it does need enough evidence to discharge its own manufacturer and distribution responsibilities.
Product reviews should respond to actual risk
The FCA simplified product review frequency in December 2025. For relevant non-investment insurance products, manufacturers now determine appropriate regular review intervals on an ongoing basis by reference to the potential for customer harm arising from product risk factors, and they must retain the reasoning for that determination.
This gives firms greater flexibility but requires more judgement. Higher-risk products may need review more frequently than once every 12 months, while lower-risk products may justify less frequent scheduled reviews. The decision should take account of matters such as the customer base, vulnerability, indicators emerging from the value assessment, claims and complaints, and the nature of the distribution arrangements.
A scheduled review date should not delay action where new evidence emerges. If claims outcomes deteriorate, complaints rise materially or a broker channel begins producing unexpected customer outcomes, management should consider whether the product or distribution arrangement requires earlier investigation.
The quality of the review matters as much as its frequency. A product file that reaches the same conclusion repeatedly without demonstrating what new evidence was examined may show that a meeting occurred, but not necessarily that the product was genuinely reassessed. Management should be able to identify what changed, what challenge occurred and what actions followed.
Evidence and remediation are the real test
The strongest PROD 4 frameworks connect product design with evidence from live business. Claims, complaints, customer research, distribution data, remuneration and other management information should help management determine whether the assumptions made when the product was approved remain valid.
No single metric should become a substitute for judgement. A low complaint rate does not prove good value, and a low claims ratio does not automatically prove poor value. The firm needs to understand why the outcome exists and whether it is consistent with the nature of the product and the intended customer benefit.
When a problem is identified, product governance should have consequences. Depending on the issue, the firm may need to change pricing, product features, remuneration, distribution arrangements or customer communications. Where customer harm has already occurred, remediation may also need to be considered.
That feedback loop is ultimately what makes the framework credible. Management should be able to trace a material concern from the evidence that identified it, through challenge and decision-making, to the corrective action and any subsequent testing that showed whether the change worked.
How Regulatory Counsel can support
Regulatory Counsel supports MGAs, insurers and insurance intermediaries with PROD 4 and insurance product governance. We can review manufacturer status, co-manufacturing arrangements, product approval, target-market methodology, fair value, distribution governance, product reviews and remediation, either as a focused independent review or alongside existing compliance and product teams.
Speak to Regulatory Counsel to discuss a PROD 4 compliance review.
Frequently Asked Questions
No. Manufacturer status depends on the MGA's actual decision-making role in designing and developing the particular product. The commercial MGA label does not determine the regulatory position.
Yes. Where more than one firm performs manufacturing activity, the applicable PROD responsibilities and written arrangements need to reflect their actual roles. The lead manufacturer option may be available for qualifying products where all relevant conditions are met.
An insurance intermediary cannot be the lead firm under the current PROD 4 lead manufacturer option. Firms therefore need to consider the ordinary co-manufacturer framework where an intermediary has a substantial product design role and the conditions for the lead option are not met.
Not as a universal minimum for relevant non-investment insurance products. Firms determine and record an appropriate review interval based on the potential for customer harm, with higher-risk products potentially reviewed more frequently and lower-risk products less frequently.
The assessment should consider the relationship between the overall price paid by the customer and the quality of the product and services received. This includes relevant product benefits, limitations and distribution costs rather than premium alone.