FCA launches study into pure protection market

The Financial Conduct Authority (FCA) has announced that it intends to launch a market study into how pure protection insurance products are sold, after highlighting concerns that competition is not working in the market.

Pure protection products are designed to help individuals and their families with their finances, should the policyholder die or become unable to meet their financial commitments.

The regulator said that around £4bn was paid out in claims in 2022, with the products being mainly sold through intermediaries such as independent financial advisers and mortgage brokers.

However, the FCA said it has concerns that the design of commission arrangements may not allow firms to deliver good outcomes to policyholders.

It is also suggested that some products may be providing poor value, for example, if the total premiums paid over a lifetime far exceed the maximum conceivable pay out.

Therefore, the FCA will look to understand how the market is working, exploring consumers’ understanding of the products they are buying, the competitive constraints on insurers and intermediaries, and potential conflicts of interest in the structure of commission.

The regulator will primarily focus on the sale of term assurance, critical illness cover, income protection insurance and whole of life insurance, including policies for over-50s that offer guaranteed acceptance.

Executive director of consumers and competition at the FCA, Sheldon Mills, said: "Pure protection can offer peace of mind and financial security, often when people are at their most vulnerable. Consumers should be able to buy products which meet their needs and provide fair value.

"We have seen indications that this may not be the case across the pure protection market and we will act if we find that the market is not working well."



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