The Financial Conduct Authority has urged insurers and intermediaries to do more to close what it described as a persistent “protection gap” in the UK, after finding that a majority of adults still lack cover that would support them or their families in the event of serious illness, injury or death.
Publishing interim findings from its competition review of pure protection products, the FCA said that while the market generally works well for consumers who hold cover, take-up remains low relative to need. The regulator found that 58% of UK adults do not hold a pure protection product, despite many being likely to benefit.
Pure protection insurance includes life insurance, critical illness cover and income protection, and pays out only when a specified event occurs. Unlike investment-linked products, premiums are used solely to provide cover rather than generate savings or returns.
For consumers who do purchase protection products, the FCA said outcomes are broadly positive. The market offers a wide range of products, most claims are paid when needed, and the cost of cover has remained broadly stable in recent years.
However, the regulator said demand remains constrained by low consumer awareness and engagement. FCA research suggests many consumers do not recognise their potential need for protection cover, are not prompted to consider it, or misunderstand what products do and how they work. Affordability concerns and weaknesses in parts of the sales process were also cited as contributing factors.
The FCA said it is exploring what more can be done, working with insurers, advisers and other stakeholders, to improve consumer understanding and access to protection products.
“These insurance products play a vital role in helping families manage some of the most difficult experiences in life,” said Graeme Reynolds, director of competition and interim director of insurance at the FCA. “While competition in the market is mostly working well for consumers, many more people could benefit from protection. We will work with industry to reduce this gap, to help consumers navigate their financial lives.”
Alongside take-up, the regulator said it will also look more closely at product switching, with a focus on ensuring that any switch clearly benefits consumers and meets their needs. The FCA said it has already seen examples of firms delivering good value, and will assess this further using updated 2025 data ahead of its final report.
The FCA has invited feedback on its interim findings by March 31, 2026, and said it will publish a final report in the third quarter of 2026, setting out its conclusions and an update on progress.
The UK protection market is long-established and highly competitive, with a mix of large composite insurers and specialist providers offering term life, critical illness and income protection products. Distribution is dominated by advisers, with protection often sold alongside mortgages, pensions or broader financial planning.
Despite that, industry data has consistently shown protection cover remains under-penetrated relative to income levels and household liabilities, particularly among younger consumers, the self-employed and those without mortgage debt. Industry bodies and insurers have repeatedly pointed to education, engagement and clearer product communication as central challenges, rather than pricing or product availability.
The FCA’s review comes as insurers and intermediaries continue to adapt protection propositions to changing working patterns, rising household costs and growing awareness of health and income risks - trends that the regulator said underline the importance of closing the protection gap.
