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The FCA has published the final report of its market study into the distribution of pure protection products – such as life insurance, critical illness cover and income protection – to retail customers.
The FCA found that competition in the distribution of these products generally works well for product holders, with high claims acceptance rates and premiums paid in claims generally exceeding 50%. However, 58% of people do not hold any protection products, and 59% of those have never considered their protection needs. The FCA is concerned that this “protection gap” stems from limited consumer awareness and understanding, and from barriers in the sales process – particularly affecting consumers with pre-existing medical conditions, renters, lower-income households and the self-employed.
The FCA intends to address the protection gap through a combination of FCA-led, industry-led and wider stakeholder-led initiatives, relying on existing frameworks rather than new rules. On the demand side, it will work with partners including the Money and Pensions Service to introduce protection prompts at key life events, while trade associations such as the Association of Mortgage Intermediaries (“AMI“) and the Protection Distributors Group will lead initiatives to strengthen adviser engagement and consumer awareness. On the supply side, the FCA proposes to run a TechSprint to explore technology-enabled solutions to friction in the consumer journey, with expressions of interest invited by 13 November 2026.
The FCA also identified a small number of issues relating to price and quality outcomes, including loaded premiums, restricted panels, guaranteed acceptance over 50s products, unnecessary switching and the value of income protection. On loaded premiums, the FCA concluded that, at current levels, they are not leading to poor pricing outcomes and that market-wide intervention is not required. On unnecessary switching, only approximately 19,000 customers per year (roughly 0.1% of policyholders) may be affected, and the FCA has deprioritised market-wide intervention in favour of continued supervisory monitoring.
Looking ahead, the market study will now move into an implementation phase from October 2026, with the FCA expecting meaningful progress over the next 12 to 18 months and a progress update by the end of 2027. While further regulatory intervention is not currently considered necessary, the FCA will keep this under review.
About the author(s)
Duncan is a Principal Associate in the Funds and Financial Services team specialising in financial services regulation.
Duncan advises clients across a wide range of sectors including banking, consumer finance, payment services, insurance, asset management and pensions with a particular focus on retail banking, regulated credit and payment services.