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FCA to scrutinise whether pure protection market provides fair value to consumers 

ended 21. March 2025

The FCA has launched a market study into how well the distribution of pure protection insurance products – which support families with financial commitments if someone becomes critically ill or dies – is working for consumers. In 2023, around £4.85bn was paid out in claims on individual policies to support people suffering from bereavement, illness, and injury. While the FCA has seen indications of good outcomes for consumers and relatively few complaints, there are concerns that commissions used to sell these products may affect the outcomes consumers receive and the products’ value or design.

The study will examine whether:  

  • the structure of commission encourages advisers to suggest switching that may not be beneficial for consumers  
  • premiums are being raised by insurers to pay a higher commission to an intermediary
  • the products provide fair value
  • the market supports innovation and growth

The market study will focus primarily on the sale of four products – term assurance, critical illness cover, income protection insurance and whole of life insurance. It will allow the FCA to carry out a more detailed analysis in these areas using its competition powers and the launch does not presuppose any particular outcome.

Sarah Pritchard, executive director of supervision, policy, competition and international at the FCA, said:  

'Consumers rely on pure protection to provide an important safety net, often when they are at their most vulnerable be it through bereavement, illness, or injury. We are determined to ensure the market is working well and delivers good outcomes for consumers by testing it or suggesting improvements.

'In launching the study today, we will be able to take a closer look before considering next steps. We will keep stakeholders regularly updated and welcome the feedback to date that will help us plan the scope of this review.' 

Newspage asked protection experts and brokers for their views, below.

3 responses from the Newspage community

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Martin Briggs
Independent Financial Adviser at The Retirement Studio
Overall, the pure protection market is working well but it's great to see that the regulator is focused on further improving outcomes for consumers. I firmly agree that existing, suitable policies should not be unnecessarily replaced, and it’s the responsibility of advisers to ensure that their clients’ best interests are considered. We look forward to seeing the next steps and findings from the FCA. Almost £5bn being paid out in 2023 alone highlights the sheer size of the protection market and the key role it plays. Having protection in place to cope financially and emotionally in the event of difficult times such as bereavement, illness, or injury can be so important. Bereavement is especially challenging and having financial support during such a time can make a world of difference.
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Justin Moy
Managing Director at EHF Mortgages
Much of the problem stems from non-regulated firms 'selling' insurance products, removing important regulatory protection for the individual in question. In that regard, some of the practices within the industry surrounding how non-regulated firms operate definitely needs urgent review. Firms that contact policyholders claiming to be 'their Insurer' only to replace or rearrange cover unnecessarily also need to be looked at. Those who are regulated and accountable for their advice I don't see as the major issue. Arguably the most pressing issue is that too many adults are underinsured.
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Michelle Lawson
Director at Lawson Financial
The protection market as a whole, in my opinion, works well. What needs focus is the consumer confusion of products and providers as well as the non-advised companies and aggregators. Good brokers know how to advise, not sell, protection and how best for customers to protect themselves and their family to ensure they get financial help in their time of need and be part of the right statistics.