FCA to investigate protection insurance market in latest industry probe

By Ryan Hewlett

March 24 - (The Insurer) - The UK’s Financial Conduct Authority has launched a probe into the pure protection insurance market amid concerns over adviser commissions and whether the products offer fair value to consumers.

The review will look at how effectively the market is working, with the FCA highlighting “concerns” that commissions used to sell protection products may affect the outcomes consumers receive and the products’ value or design.

Protection insurance products paid out around 4.85 billion pounds ($6.29 billion) in claims on individual policies to support people suffering from bereavement, illness and injury over 2023.

While the watchdog said it had seen “relatively few complaints” from the market segment, it said it would launch a so-called market study to examine the role and structure of commissions paid to brokers and advisers.

The regulator is looking into whether the structure of commissions encourages advisers to suggest switching that may not be beneficial for consumers and whether premiums are being raised by insurers to pay a higher commission to an intermediary.

It will also examine whether the products provide “fair value” and the extent to which the market supports innovation and growth.

The market study will focus primarily on the sale of four products: term assurance, critical illness cover, income protection insurance and whole of life insurance. It will allow the FCA to carry out a more detailed analysis in these areas using its competition powers. The launch of the study does not presuppose any particular outcome.

Initial findings and any proposed next steps will be published by the end of 2025.

Sarah Pritchard, executive director of supervision, policy, competition and international at the FCA, said the regulator is “determined” to ensure the market is working well and delivers good outcomes for consumers by testing it or suggesting improvements.

“In launching the study today, we will be able to take a closer look before considering next steps. We will keep stakeholders regularly updated and welcome the feedback to date that will help us plan the scope of this review,” said Pritchard.