The FCA has published a interim report in its market study on the distribution of pure protection products to retail customers.
The report notes that the pure protection market works well in many respects, including by offering a wide range of products, boasting high claims acceptance rates and ratios, maintaining stable new business premiums and using technology efficiently. On average, loaded premiums or restricted panels weren’t found to be currently creating worse pricing outcomes for consumers.
However, there were a number of areas which the FCA felt could operate more effectively:
- The protection gap – there are many consumers who would likely benefit from pure protection products but don’t currently use them. The FCA suggest that this may be because consumers aren’t aware of their needs, are unable or unwilling to pay for such products, or have misconceptions about them.
- Income protection claims ratios are lower than other pure protection products – the FCA plans to refresh its assessment in this area ahead of the final report using 2025 premium and cost data from a sample of insurers.
- Incentives to switch consumers – the FCA wants the sector to collect, monitor and report better information on customers switching to ensure it’s aligned with their needs.
- Claims experience – the FCA understands that intermediaries can encourage certain practical steps at the point of sale (such as placing policies in trust, setting up wills or powers of attorney). The regulator wants to encourage more of this, to improve consumers’ experience if and when they need to claim.
The FCA expects to publish its final report in Q3 2026.