The Financial Conduct Authority has published the final report of its Pure Protection Market Study, concluding that the distribution of pure protection products generally works well for people who hold cover, while a substantial gap remains among those who do not.
The regulator found that 58% of adults have no life insurance, critical illness cover or income protection, and that 59% of that group have never even considered their protection needs in the first place.
For those who do hold cover, the FCA said access to a wide range of products and distributors is good, claims acceptance rates are high and complaints levels are low. But it identified specific friction points for consumers with more complex needs, including lengthy underwriting, delays obtaining medical evidence and difficult application processes.
The regulator said firms could do more on communication and transparency, including providing regular policy information and clearer detail about how claims work, and specifically flagged that firms should consider the risk of economic abuse when recommending single versus joint policies, alongside being clearer about ancillary services so they don't overshadow the core protection policy itself.
Ewen Tweedie (pictured), actuarial director at Broadstone, said the FCA has correctly identified that the greatest weakness in the pure protection market isn't the products themselves, or even their price, but the fact that millions of people never consider whether they need cover at all. He said that finding marks a shift in how the regulator is framing the issue, moving from a conduct-focused lens centred on value toward a growth-focused lens centred on engagement.
Tweedie said prompts at key life events and greater adviser engagement are sensible steps, and that the FCA's decision not to extend targeted support is understandable, since that mechanism would mostly help consumers who are already engaged rather than those who haven't considered protection at all. But he said the scale of the gap means policymakers may ultimately need to go further than voluntary awareness initiatives, presenting insurers with a genuine opportunity to think not just about how they take products to market, but how they promote the importance of protection more broadly.
He pointed to the workplace as a potentially effective route to wider coverage, arguing that auto-enrolment has already shown how the structure of employment can help overcome consumer inertia, and that there's a strong case for government, employers and providers to explore how simple protection products could be built more consistently into workplace benefits, with new employees given protection prompts and information as a straightforward way to raise awareness and engagement. He added that more consistent claims statistics across the market would help advisers compare providers on a level footing and strengthen consumer confidence in the value of protection insurance generally.
Tweedie said the protection market isn't broken, but that participants across the value chain should consider how they can work together to increase engagement and make protection more accessible for everyone.
What makes the FCA's framing notable is the specific distinction it draws between a value problem and an awareness problem: a market that scores well on claims acceptance, complaints and product range but still leaves the majority of adults without any cover isn't failing in the way conduct regulation typically targets.
That's precisely why the regulator's decision to stop short of targeted support is defensible on its own terms, since that tool works best for consumers already partway toward a purchase decision, not the much larger group who haven't started thinking about protection at all.
Tweedie's workplace suggestion is a reasonable extension of that logic, given that auto-enrolment succeeded specifically because it removed the need for individual consumers to actively opt in, the same inertia problem the FCA's own research says defines most of the protection gap.
