The Financial Conduct Authority (FCA) wants to help the protection insurance industry close the consumer protection gap.
Furthermore, while the FCA is proposing some modest measures, it said it was not anticipating making any significant market wide interventions.
To help close the gap it is considering extending the targeted support regime being enacted in the pensions and investments markets to protection along with other awareness campaigns.
The regulator will conduct a series of industry stakeholder workshops this spring to explore the possibilities in this area.
It said it had seen examples of firms delivering good value for consumers and will look more closely with updated 2025 data ahead of the final report.
The FCA will also consider ways to improve product switching so firms make sure any switch clearly benefits the consumer and meets their needs.
‘Market mostly works well’
Cutting the protection gap is the regulator’s defining proposal from the interim report of its pure protection market study, which found that, for consumers who have taken out protection insurance, the market mostly works well.
It found intermediaries accounted for around 80% of sales in 2024 and there were high claims pay out rates.
Publishing its interim findings the FCA praised the industry for having a wide range of products, most consumers claiming when they needed to, and the costs of cover remaining stable in the last few years.
“But 58% of adults do not hold a pure protection product even though many could benefit from them. The FCA wants to help close this gap,” it said.
“Research suggests the gap exists because consumers aren’t aware of their needs and aren’t prompted to consider them.
“Other issues include ability to pay, misunderstandings about the product or improvements needed in the sales process.
“The FCA is exploring what more can be done, working with industry and other stakeholders, to better support consumers,” it added.
‘We want to help firms reduce the protection gap’
In its interim report, the FCA went further and highlighted the importance of products being more inclusive and supporting wider communities and those with vulnerabilities.
“We want to help firms reduce the protection gap. This will let more consumers access suitable financial products, making sure that any who are vulnerable or harder to insure are not left out,” it continued.
“During our study, stakeholders suggested initiatives that may help tackle the protection gap.
“These included awareness campaigns, using more prompts or trigger points, or extending the concept of targeted support that we’re introducing for pensions and retail investments to pure protection.
“Ahead of the final report, we will work with stakeholders to agree the work to take forward. We will organise workshops with stakeholders in Spring 2026.
Feedback on the interim findings is open until 31 March with a final report published in Q3 2026, setting out final findings and an update on progress.
FCA director of competition and interim director of insurance Graeme Reynolds said: “These insurance products play a vital role in helping families manage some of the most difficult experiences in life.
“While competition in the market is mostly working well for consumers, many more people could benefit from protection. We will work with industry to reduce this gap, to help consumers navigate their financial lives.”
High impact on firms
The interim report was delayed from December when the regulator revealed it would reach into 2027, it had previously announced it was expected to have a “high” impact on firms, and was going to reach into the second half of 2026.
The process began in August 2024 when the regulator revealed it would be conducting a review into the operation of the pure protection market including commission structures including loaded commission and the shrinking insurer market.
In March 2025 the FCA expanded the areas under consideration for its pure protection market study to include restricted panels of insurers used by distributors’ cover for customers who have pre-existing medical conditions and barriers to innovation and investment.
It said it would also consider the activities of reinsurers, portals, product comparison platforms, and lead generators as part of its review.
These had not been within the scope of the study when the FCA published its initial terms of reference in August 2024, but were added after consultation with the market.
However, private medical insurance (PMI), business and key person insurance, accident, sickness and unemployment insurance (ASU), funeral plans and insurance products with a savings or investment element were put outside the scope.
