Context
The FCA has published its final report in relation to its Pure Protection Market Study; MS24/1.5. It has also published findings on switching, claims experiences, and fair value in the protection market. Generally, the FCA found that competition works well in the market, but it has reminded firms of requirements and good practice under the Consumer Duty and its product governance rules. It is not planning new market-wide measures, but will act where firms fall short of requirements and is setting out action to close the protection gap and support consumers.
Key points to note and next actions
- The FCA launched this market study in March 2025 to assess whether competition in the distribution of pure protection products – such as life insurance, critical illness cover and income protection – works well for consumers.
- The FCA has found that competition generally delivers good outcomes for people who hold these products, with a wide range of products available and high claims acceptance rates.
- 58% of people don’t hold any protection products, and 59% of those have never considered their protection needs. The FCA is concerned where this ‘protection gap’ results from limited consumer awareness and understanding, or from challenges in the sales process making access difficult.
- Subject to sufficient interest, the FCA plans to run a TechSprint in Q3 2027 to explore technology-enabled solutions to close the protection gap. Expressions of interest are invited by 13 November 2026, and the FCA will confirm by the end of 2026 whether the TechSprint will proceed. Further details are in Chapter 3 of the Final Report. Please submit expressions of interest to: PureProtectionMS@fca.org.uk.
Tackling the protection gap
- Those most affected are consumers with more complex needs, less stable incomes, lower financial resilience or fewer opportunities to engage with protection products through established distribution channels. This includes consumers with pre‑existing or complex medical conditions, renters, lower‑income households and people in self‑employment or gig economy work.
- On the demand (consumer) side, there is low awareness and limited understanding of these products. Some consumers do not recognise when protection is relevant to their circumstances or do not engage sufficiently with the potential financial consequences of death, serious illness or incapacity.
- To encourage consumers to consider their protection needs more actively, the FCA has indicated it will work with partners so they can introduce or improve:
- protection prompts at key life events, such as purchasing a property and planning for future savings and financial needs;
- nudges for consumers to use tools such as trusts and beneficiary nominations; and
- consumer awareness initiatives and strengthened adviser engagement.
- On the supply (firms) side, whilst competition has driven improvements over time, there are aspects which can cause issues:
- A long and complicated sales process can lead consumers to abandon it.
- Underwriting can be lengthy or complex, medical evidence takes time to obtain, product communications can be unclear, or products may not be available for consumers with more complex needs.
- Some firms told the FCA that they are not always clear whether regulatory requirements allow them to innovate in product design, distribution and consumer journeys.
- To improve access, the FCA will encourage innovations to address complex underwriting and product design, including by running a TechSprint. The FCA will also support initiatives to tackle delays in obtaining medical evidence. In parallel, it will run a myth‑busting webinar for firms to address any regulatory uncertainties.
A wider consideration is whether this should realistically be the remit of the FCA alone, or whether this is more a societal issue in the way we financially educate our young people, and/or the economic choices made by successive governments which affect the lives of consumers.
Improving price and quality outcomes
- The FCA found a handful of smaller issues, limited in scale and not systemic, but where targeted action could prevent harm or deteriorating outcomes.
- These include some instances where intermediaries may be incentivised to switch consumers unnecessarily and ongoing industry requests for clarity on how premiums can be adjusted for commission.
- The FCA wants the market to deliver consistently strong price and quality outcomes as this will also support greater consumer trust and take up of protection products. The FCA reminds firms of the requirements under the Consumer Duty (the Duty) and the Product Intervention and Product Governance Sourcebook 4 (PROD 4).
- Having reviewed firms’ fair value assessments, the FCA has set out positive examples and areas for improvement. There is scope for firms to strengthen the evidence underpinning their assessments of target market value and the impact of remuneration and distribution arrangements on consumer outcomes and fair value.
Fair value assessments – positive examples and areas for improvement
Positive examples
- Some firms showed a clear link between the total price paid by customers and the quality of the product and related services. They supported this with both qualitative and quantitative evidence, including analysis by customer cohort, distribution channel, pricing variation and remuneration structure.
- Manufacturers assessed whether commissions, premium loading and other distribution costs were consistent with fair value, including whether non-standard remuneration arrangements were justified by better service or improved customer outcomes.
- The FCA saw good practice where firms compared outcomes across distributors, channels and remuneration models, investigated weaker value metrics, and used governance processes to approve or challenge arrangements that could affect value.
- Some firms monitored the volume and level of non-standard distribution arrangements, and acted where arrangements adversely affected customer value, including adjusting premiums, reviewing remuneration structures or ending distributor relationships.
- Distributors provided stronger evidence where they could explain how commission levels reflected the cost, nature, extent and value of their services, including by analysing costs by marketing channel or insurer.
- Enhanced commission arrangements were more persuasive where firms could demonstrate measurable service benefits, such as improved customer experience, lower early cancellation rates or greater use of trusts and beneficiary nominations.
- Several good practices were noted in relation to ‘Guaranteed acceptance over 50s’ cover.
Areas for improvement
- Some firms could be clearer on how they assessed whether the total price paid by customers, including remuneration and distribution costs, was reasonable against the quality of the product and services provided.
- Firms should strengthen the rationale for thresholds, tolerance limits and customer value metrics used in fair value assessments, particularly where value outcomes appear weaker for certain cohorts, channels or distributors.
- There is scope to provide stronger evidence on the impact of commissions, premium loading and additional distributor fees on the product’s intended value and the customer outcomes delivered.
- Distributors could better evidence the relationship between remuneration and the services they provide, moving beyond high-level descriptions to show costs incurred, service benefits and how remuneration is justified.
- The FCA also identified areas for improvement in relation to ‘Guaranteed acceptance over 50s’ cover, indicating that firms should review whether their assessment of price, quality and customer outcomes is sufficiently robust for this product type.
- Three areas for improvement were noted in relation to ‘Guaranteed acceptance over 50s’ cover.
Firms should review the examples and findings in the report and consider whether they need to improve how they deliver, and evidence, good outcomes for consumers.