Here is the latest from the FCA, as take-up on Life/Illness continues to decline as the welfare state expands;
The Financial Conduct Authority (FCA) has called on the insurance industry to help more consumers access products that support them and their families if they become critically ill or die.
The interim findings of its competition review of pure protection products found that, for those consumers that have taken out protection insurance, the market mostly works well. There are a wide range of products, most consumers can claim when they need to, and the costs of cover have remained stable in the last few years.
But 58% of adults do not hold a pure protection product even though many could benefit from them. The FCA wants to help close this gap.
Research suggests that the gap exists because consumers aren’t aware of their needs and aren’t prompted to consider them. Other issues include ability to pay, misunderstandings about the product or improvements needed in the sales process.
The FCA is exploring what more can be done, working with industry and other stakeholders, to better support consumers.
Graeme Reynolds, Director of Competition and Interim Director of Insurance at the FCA, commented:
“These insurance products play a vital role in helping families manage some of the most difficult experiences in life. While competition in the market is mostly working well for consumers, many more people could benefit from protection. We will work with industry to reduce this gap, to help consumers navigate their financial lives.”
The FCA has seen examples of firms delivering good value for consumers and will look more closely with updated 2025 data ahead of the final report.
The FCA will also consider ways to improve product switching so firms make sure any switch clearly benefits the consumer and meets their needs.
The FCA welcomes feedback on its interim findings by 31 March 2026. A final report will be published in Q3 2026, setting out final findings and an update on progress.
INDUSTRY COMMENT
Erika Parker, Actuarial Director at leading independent insurance consultancy Broadstone, commented:
“This is a positive report from the FCA which finds a market that is functioning well albeit with the potential to expand further by closing the ‘protection gap.’ It is evident that the FCA will not seek to ban products or commission in its future final report.
“Better product promotion to help build consumer awareness and understanding of the value of protection products will be critical, particularly at key life events such as buying a house or having a child. A smoother sales process and innovation in payment offerings could also build product ownership.
“A growing protection market will be critical to supporting the many people who rely on these insurance products to support them when they are at their most vulnerable, whether they are suffering from long-term ill health or going through a bereavement.
“Separately, the FCA is expected to update the funeral plan regulation this year and could consider reinstating commission for these products.”
Be the first to comment