The Financial Conduct Authority (FCA) will commence its market study into the distribution of pure protection products to retail customers in the first quarter of 2025.
On announcing the market inquiry and terms of reference in August, the regulator said the review would begin later in the 2024-25 financial year as it was considering other pending priorities.
In the latest update to its regulatory initiative grid the FCA confirmed the evaluation would begin in the first three months of the New Year, but did not give an exact date.
Commission, competition and churn
Key subjects in the review will be commission structures including loaded commission and the shrinking insurer market, that intermediaries may be incentivised to unnecessarily churn products.
Responding to questions from Health & Protection last month, the FCA did not rule out banning loaded premiums to boost commission.
“Every aspect of the way in which premiums are charged will be on the table for us to review, so that will be part of our investigation,” executive director of consumers and competition Sheldon Mills (pictured) told Health & Protection.
And asked if he was disappointed in the way the market had responded to FCA action, Mills added: “You can take from the fact that we’ve launched the study, that we have concerns in that market.”
The FCA has raised several issues with the protection market over the last two years, including a scathing letter to life insurer CEOs from FCA director of insurance Matt Brewis a year ago.
Much to like about FCA market study
The industry has largely welcomed the FCA’s market study.
Writing in Health & Protection, Tony Müdd, divisional director development and technical consultancy at St. James’s Place, said it was a pre-emptive strike on the sector with much to like about it.
More widely, advisers applauded the move and told Health & Protection it was the right thing to do.
Insurers said they would be engaging with the FCA to achieve “good outcomes” and a “competitive market”.