The Financial Conduct Authority (FCA) has published a market overview paper as part of its study into the pure protection market, marking the first formal update since the review was launched in March. The overview is the first of two papers due ahead of an interim report expected around the end of this year.
The pure protection market, which includes products such as term life insurance, income protection and critical illness cover, has been under increasing regulatory scrutiny. These products are sold to millions of householders across the UK, and the FCA's study is examining whether the way they are distributed serves consumers well. The regulator's terms of reference pointed to concerns about competition, whether customers are able to access products that genuinely meet their needs, and whether sales channels are providing appropriate advice and outcomes.
The latest paper offers the FCA's initial assessment of the market. It explored how products are designed and what risks they cover, the different customer groups purchasing them, and the role of advisers, intermediaries and direct sales. The paper also took stock of the main players in the sector, as well as recent developments in regulation, consumer demand and product innovation. The review comes against the backdrop of broader regulatory initiatives, including the Consumer Duty and previous work on general insurance pricing practices. Both have raised the bar for transparency, fairness and consumer understanding in retail financial services, and the FCA's scrutiny of pure protection is seen as a natural extension of those priorities.
David Gray, senior consultant and actuary at Broadstone, said the paper should be treated as a foundation for the regulator's next steps. He encouraged firms to consider carefully whether the overview reflects their business models and practices.
"Given the possibility of reform to the market and concern expressed in the FCA’s initial terms of reference for the market study, we would encourage firms to review the paper critically to ensure it reflects their business accurately across these aspects and provides a fair foundation for the regulator’s next steps," he said.
A second paper is due later this year, followed by the FCA's interim findings around year end. The final conclusions are expected in 2026 and could lead to reforms in how protection products are designed, distributed and overseen.
