Pure protection products are intended to safeguard individuals and their families financially in the event of death or if the policyholder becomes unable to meet financial obligations. In 2022, approximately £4 billion was paid out in claims. These products are largely sold through intermediaries such as independent financial advisers and mortgage brokers.

The FCA has raised concerns that the structure of commission arrangements may be hindering firms from delivering favorable outcomes for policyholders. Additionally, there are worries that some products may offer poor value, such as instances where the total premiums paid throughout the policyholder’s life significantly exceed the maximum possible payout.

To better understand the market’s dynamics, the FCA will investigate how consumers engage with and comprehend the products they are purchasing, the competitive pressures on insurers and intermediaries, and potential conflicts of interest arising from commission structures.

The study will primarily focus on four types of products: term assurance, critical illness cover, income protection insurance, and whole-of-life insurance, including policies with guaranteed acceptance for individuals over 50.

Sheldon Mills, Executive Director of Consumers and Competition at the FCA, stated:

“Pure protection provides essential peace of mind and financial security, often during some of life’s most vulnerable moments. Consumers should have access to products that meet their needs and offer fair value.

“We’ve observed signs that this may not be the case across the pure protection market, and we will take action if we find the market is failing consumers.”

The FCA is encouraging feedback on its Terms of Reference and, ahead of the market study launch, plans to engage with firms, industry groups, and other stakeholders to gather insights on the market and the issues under consideration.