The Financial Conduct Authority (FCA) is warning it will continue to monitor outcomes for income protection (IP) customers through its supervisory work and review of market data.
While the regulator is not taking any immediate interventions, it noted if evidence showed these products may not be providing fair value to consumers, it may launch further research and take action where appropriate.
The findings were part of its final report on its pure protection market study.
In it’s interim report published earlier this year, the FCA highlighted it would be investigating income protection (IP) claims ratios and wider claims experiences before publishing it’s final report.
Income protection fair value
Exploring these results from its investigation into income protection, the regulator reminded firms that under PROD 4 they must be able to demonstrate that the product delivers fair value.
It pointed out that: “Where a firm is unable to identify and clearly demonstrate that the product will provide fair value, it must ensure the product is not marketed or distributed, or that changes have been made so that it provides fair value.
“This is particularly important given the use of income protection remains a key part of proposals to reduce the protection gap, particularly for self‑employed and gig‑economy workers.”
The regulator said it will “continue to monitor outcomes for income protection customers through our supervisory work and review of market data”.
It added “this will include considering relevant value measures, complaints data and other evidence of customer outcomes as part of ongoing supervisory monitoring”.
But it warned that “if this evidence indicates that income protection products may not be providing fair value to consumers, we may launch a further phase of work to gather more evidence and take action where appropriate”.