The Financial Conduct Authority (FCA) has announced an upcoming market study into the sale of pure protection insurance products, citing concerns about competition in the sector.
Pure protection insurance, which offers financial support to policyholders and their families in cases of death or financial hardship, accounted for roughly £4 billion in claims during 2022. These products are primarily sold through intermediaries, including independent financial advisers and mortgage brokers.
The FCA has expressed worries that current commission structures may not be leading to favourable outcomes for consumers. The regulator is particularly concerned about the value of certain policies, noting instances where the total premiums paid over the policy’s duration could far exceed the maximum potential benefit.
The FCA plans to look into consumer awareness and understanding of these products, the competitive dynamics affecting insurers and intermediaries, and potential conflicts of interest tied to commission-based sales.
Pure protection can offer peace of mind and financial security, often when people are at their most vulnerable. Consumers should be able to buy products which meet their needs and provide fair value. #FinancialServices #ConsumerProtectionhttps://t.co/AVmcqKWLVv
— Financial Conduct Authority (@TheFCA) August 28, 2024
The pure protection market study, which is scheduled to commence later in the 2024/25 financial year, will concentrate on four key product types: term assurance, critical illness cover, income protection insurance, and whole of life insurance, including policies for over-50s with guaranteed acceptance.
“Pure protection can offer peace of mind and financial security, often when people are at their most vulnerable,” said Sheldon Mills (pictured), executive director of consumers and competition at the Financial Conduct Authority. “Consumers should be able to buy products which meet their needs and provide fair value.
“We have seen indications that this may not be the case across the pure protection market, and we will act if we find that the market is not working well.”
The FCA is seeking feedback on its terms of reference and will engage with firms, industry groups, and other stakeholders to gather insights ahead of launching the study.
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