In UK protection insurance, the FCA says “we’re working with partners to increase coverage – so that more people are protected when they or their families need it most”. At the same time, the regulator isn’t planning new market-wide measures, but will take action where firms fall short of requirements. The push follows the FCA’s pure protection market study.
Competition works for existing customers, but coverage is the gap
On the protection gap, the FCA states: “Around 58% of adults have no life insurance, critical illness cover or income protection – and 59% of that group has never considered it”, in its press release on the initiative.
In the market study itself, the FCA states: “58% of people don’t hold any protection products, of which 59% have never considered their protection needs”, as the final report of the study sets out.
The same report describes how the market performs for those who do hold cover. The FCA writes that “competition in the distribution of pure protection products generally works well for product holders and delivers good outcomes – a wide range of products are offered”, and that “claims acceptance rates are high, the proportion of premiums paid in claims are generally over 50%”, in its assessment of competition in distribution.
On claims outcomes by product, the report says that income protection had the lowest rate of claims accepted across pure protection products at 86%.
For readers following claims handling, InsuraBeat has separate coverage of the FCA’s claims-management review.
Who leads what: prompts at key moments, awareness campaigns and adviser conversations
The press release lists these actions:
- The Money and Pensions Service and the Digital Property Market Steering Group will prompt people to think about protection at key moments – such as becoming a parent or buying or renting a home
- The Protection Distributors’ Group will lead a consumer awareness campaign, targeted at groups who are less likely to take out protection products
- The Association of Mortgage Intermediaries will lead work to help advisers improve how they discuss protection with their customers
These actions are described in the FCA’s press release, which also says who the work is aimed at. The work will focus on groups who are disproportionately unprotected – such as renters, the self-employed and gig economy workers, those on lower incomes and people with pre-existing medical conditions.
On the industry-led work, the FCA writes: “We have asked the Protection Distributors Group (PDG) to lead the market’s key stakeholders in developing a market‑wide initiative aimed at addressing weak consumer engagement with and understanding of protection.” It also writes: “The Association of Mortgage Intermediaries (AMI) will lead a cross‑industry initiative to strengthen adviser engagement with protection”, according to the final report.
Mandated protection discussions and auto-enrolment are not being taken forward at this stage
The regulator is explicit about what it is leaving out: “We are not taking forward more interventionist remedies, such as mandated protection discussions or auto‑enrolment, at this stage because they would be disproportionate and could encourage a tick‑box approach”, the FCA writes in the final report.
The qualifier “at this stage” is part of that wording.
On broad measures, the report’s wording is: “We will continue to take supervisory or enforcement action where firms fall short of regulatory requirements, rather than introducing broad market‑wide measures.”
On conduct expectations, the FCA says that “it has reminded firms of requirements and good practice under the Consumer Duty and its product governance rules”, according to its announcement.
A webinar, a TechSprint and a roundtable: the dated items for firms to watch
The press release says the FCA will hold a webinar for firms to address any misunderstandings about its rules and expectations that may be seen as barriers. The final report also refers to a webinar: the FCA will run a myth‑busting webinar in Q1 2027 to clarify regulatory expectations.
On medical records and technology, the press release says the FCA will also work with the Association of British Insurers to reduce delays in obtaining medical records and is inviting firms to take part in a TechSprint – they should express their interest by 13 November, in the announcement of the initiative.
For the TechSprint, the final report says: “Subject to sufficient interest, we expect it to take place in Q3 2027.” On delays in accessing medical information, the final report says: “We plan to hold the roundtable in Q1 2027, with progress delivered within the next 12 to 18 months.”
Firms that want to take part in the TechSprint have an expression-of-interest date to work to.
For readers who follow life insurance in the US, InsuraBeat has separate coverage of the NAIC’s life insurance policy locator.
Switching, claims and fair value: findings for firms to read against their own evidence
The FCA has also published findings on switching, claims experiences, and fair value in the protection market, according to the press release.
On switching, the final report says there was a risk that commission structures drive poor outcomes by incentivising intermediaries to encourage consumers to switch to a new policy following the end of the clawback or indemnity period. It adds: “As described in the Interim Report, there were approximately 19,000 customers per year that may be affected by unnecessary switching, which represents roughly 0.1% of policyholders.”
On fair value, the final report says there is scope for firms to strengthen the evidence underpinning their assessments of target market value.
For readers following the FCA’s work on pricing, InsuraBeat has separate coverage of the FCA’s Mills Review on AI and insurance pricing.
