The potential to address claims data, consumer understanding of critical illness and loaded premiums have been rejected in deference of secondary growth objective, says Fairer Finance managing director James Daley.
When the Financial Conduct Authority’s (FCA) pure protection market study was launched back in 2024, the industry was rightly a little nervous.
The FCA was a year past the launch of the Consumer Duty and was on the front foot using its new rules to clean up age-old problems across the financial services industry.
Over the previous 12 months, it had shut down the GAP insurance sector for failing to offer fair value, it had launched a market study into premium finance, which it referred to as a “tax on the poor,” and had turned up the pressure on investment platforms to start paying more interest on cash balances.
When the protection market study was launched, the expectation was that the over-50s market, in particular, was likely to come under some tough scrutiny.
And loaded premiums were also very clearly in the regulator’s sights. More broadly, the industry was preparing itself for a robust debate about whether commission was driving the right outcomes for customers.
Redirect to focus on growth
But within a few months of the market study being launched, the FCA was directed by government to refocus its efforts on promoting growth, and stripping back regulation.
This led to a marked change in rhetoric from the regulator across 2025, and took the wind out of the sails of the pieces of work that had been started the year before.
The premium finance market study ended with no action.
And when the protection market study interim report was published at the start of 2026, it followed in the same vein.
While the over-50s market had been contemplating a potential existential threat – the interim report barely even mentioned the sector.
Loaded premiums were considered – but the economic analysis looked designed to prove there was not really a problem.
The final report published this week did not throw up any surprises.
While there was now at least some consideration of the over-50s market, it was given a fairly clean bill of health.
Where the FCA did find market failures, it said it would deal with these through firm level supervision.
Claims data, CI and loaded premiums
The main output from the report was a new commitment to find ways to close the protection gap.
And while that is something I wholeheartedly support, it’s a real disappointment that no action was taken on other failures in the market.
Over-50s plans are generally poor value products. They certainly have a place in the market – but consumers are often not supported to understand their limitations or told about other suitable alternatives.
Inflation risk was not even mentioned in the market study – and calls for over-50s firms to make people aware of alternatives like funeral plans were dismissed.
There was also no consideration of the way that these plans are sold with free gifts and expensive TV adverts.
Loaded premiums are another issue which is driving pockets of poor value. But the door has been closed on trying to fix this.
There was barely any mention of critical illness (CI) – and the problems with consumer understanding in that market.
And while there was a brief acknowledgement of the concerns about consistency of claims data, it was brushed aside and pushed back to the industry to sort out.
‘Massive, missed opportunity’
I’m sure the FCA will have some robust conversations with firms behind closed doors. But it’s a massive, missed opportunity to not use the platform of a market study to drive market-wide improvements.
Not every firm has their own supervisor – and the broad message that most in the sector will take away from this piece of work is that the regulator is happy, and wants to focus on helping the sector grow.
I’m going to put this down to a hangover from the last two years – during which the FCA has been under pressure to prioritise its secondary growth objective.
I hope that with new leadership in the Treasury – we can get back to seeing a regulator that is unafraid to call out poor practice, and unafraid to step into fix market failures.
Yes, we need to make sure our regulation is proportionate, and should not write new rules for the sake of it.
But there were improvements that could have been made here, which will now go unchallenged – potentially for another generation.
That’s disappointing.
