If protection industry professionals thought 2025 would prove to be a quiet year for mergers and acquisitions (M&A) activity, they have been proven quite wrong.
This summer saw Chesnara announce its agreement to buy HSBC Life UK, following on from a year in which Aviva wrapped-up its purchase of AIG Life.
This has created regulatory concerns over whether a reduced number of providers will lead to less choice for advisers and lower standards for customers.
However, data shows premiums have fallen and there is the prospect of new entrants with Beagle Street set to enter the intermediary protection market this year, while other specialists have also launched.
On the adviser side of the fence M&A activity has not been limited to just providers, with Brown & Brown and Howden continuing to acquire advice firms up and down the country.
There are worries whether fewer firms will create a capacity crunch, though others see this is an opportunity to grow their businesses.
However, among all of the concerns raised and opportunities for growth the sector is awaiting the findings of the Financial Conduct Authority’s Pure Protection market study.
This is a study in which the regulator is exploring concerns about the shrinking insurer market.
Fastest pace of consolidation in a decade
“We’re seeing the fastest pace of consolidation in over a decade – not just among insurers, but also distributors,” Justin Harper, chief marketing officer at LifeSearch, tells Health & Protection.
“This follows on from the exits and acquisitions of Aegon and Canada Life, Aviva’s £460m purchase of AIG and Chesnara’s pending acquisition of HSBC Life UK which are major shifts in the provider landscape,” Harper adds.
But Harper maintains that consolidation activity among distributors has been just as pronounced.
“Howden has expanded aggressively through adviser acquisitions in the retail protection and health benefits space, and Lloyds Banking Group, via Scottish Widows, has strengthened tied distribution channels and embedded adviser capability within its broader retail banking network,” he points out.
“This mirrors a wider trend of banks and large brokers building scale to secure market share and control customer journeys.”
Less choice
The obvious concern consolidation creates is the perception of less choice for customers.
“On the provider side, it’s concerning because it gives you less choice, less opportunity,” Naomi Greatorex, managing director at Heath Protection Solutions, tells Health & Protection.
“There’s less differentiation for us to talk to our customers about,” Greatorex continues.
“On the flip side, all insurers have different underwriting philosophies, so what you have is not only a consolidation of products and a limited choice in differential products, but also you’ve got the processing of insurance.
“So you’ve got less differences in the underwriting philosophy which gives clients ultimately less choice from an underwriting and a product perspective.”
Zanele Sibanda, head of business development at Towergate, agrees, adding clients may feel as though there are fewer options when purchasing protection and that customer service will suffer.
“This may not always be the case, however, as clients can often benefit from having access to a wider range of services from a single supplier, and larger or more specialist customer service teams – who can provide flexibility as well as dedicated or expert advice and support,” Sibanda says.
How many is enough?
So a reasonable question to ask is how many providers are enough to effectively sustain the protection market?
But this is not an easy question to answer, according to Paul Yates, product strategy director at IPipeline.
“It is impossible to say what the optimum number of providers in the market is,” Yates says.
“But again, it is right to monitor metrics that indicate that the market is still functioning and competitive,” Yates continues.
Premiums falling
Yates maintains the UK protection market has always enjoyed high levels of competition and per pound premiums are purported to be the cheapest across all developed economies as a result.
“We have continued to monitor average premiums reducing across the market, notably in term assurance – where the average premium for level term fell by 5.7% between January 2024 and January 2025,” Yates continues.
“It will be fascinating to monitor this trend as the impact of withdrawals becomes clear and as always, the providers best placed to succeed will be those able to target effectively and build a pricing strategy to win, without unnecessary margin strain.”
Choice matters
But providers themselves are alive to concerns around a perceived lack of adviser and consumer choice as noted by Guardian CEO Carlton Hood, leader of one of the sector’s newest entrants.
“Advisers consistently tell us, and the FCA’s market review confirms, that choice matters. A competitive market improves price, value, and quality,” Hood says.
“New entrants bring challenge and innovation,” he continues.
“Speaking as one of those relatively new entrants, it’s true that it’s not a particularly easy market to enter.
“Beyond the usual start-up costs, there are barriers to navigate such as reinsurance, scale efficiencies, new business strain, and panels. That’s why we’re so proud of what Guardian has achieved.
“We’ve navigated each of these challenges to become an established and credible player; one that’s proud to think innovatively and move the market forwards.”
Implications for the study
And as Peter Hamilton, head of market engagement at Zurich points out, concerns around consolidation extend to the regulator.
“What perhaps makes it more topical right now is the FCA’s Pure Protection market study, where, in the terms of reference, they expressed concerns that competitive pressures on insurers may be weakening due to the recent exit of several insurers offering pure protection products,” Hamilton points out.
“They undertook to examine whether these exits have reduced insurers’ competitive incentives to provide consumer product choice, fair value of pure protection products, and innovation to meet consumers’ needs.”
Hamilton adds it is not obvious that the pressures on insurers are weakening.
“In the UK, consumers benefit from some of the cheapest premiums available in any territory; they have guarantees on those premiums, often absent elsewhere, and they benefit from some of the most flexible products in the world,” Hamilton continues.
“The highly competitive nature of the market today may have contributed to some insurers pulling out, and is potentially a barrier to some new ones coming in,” he says.
“The challenge is to ensure an environment which offers real value to customers, which supports a robust distribution intermediary market and which creates sustainable business for insurers.”
Protection advice capacity
Though the robustness of that intermediary market is threatened as protection advice capacity comes under even further pressure.
“More than a decade on, we’re still suffering the after-effects of RDR and the PPI mis-selling scandal, culminating in withdrawal of feet on the ground from banks and larger tied sales forces,” LifeSearch’s Harper says.
“Fewer independent advisers, increasing movement towards specialism and fewer protection specialists, due to consolidation and adviser retirement, mean less face-to-face and telephone-based availability for consumers who need tailored advice.”
However, some advisers are more “glass full” about the situation, as Ascend Broking Group healthcare director Kristian Breeze maintains smaller independent brokers are thriving.
“Freed from the weight of shareholder-driven M&A strategies, they are able to deliver a higher-touch service,” Breeze says.
“We have won corporate mandates against some of the largest brokerages precisely because of our ability to react quickly, deploy staff on site where needed, and provide continuity of relationship,” he continues.
“This level of agility is difficult for larger organisations to replicate once layers of management and centralised functions are in place.”
Pace of acquisitions will continue
As for the immediate future, Breeze expects the pace of acquisitions across the protection market is only likely to continue.
“With private equity still active in the UK insurance distribution sector, and global players eager to increase footprint, consolidation will remain a defining trend,” Breeze says.
“PwC’s 2024 insurance M&A outlook forecasts that the UK will remain one of the most active markets in Europe for deal-making, citing protection and health insurance distribution as prime targets.”
Though Breeze says customers should not fear fewer names above the door.
“In reality, the beneficiaries of consolidation are often the smaller, independent brokers who remain,” Breeze continues.
“They represent the counterweight to scale: delivering speed, local presence, and a depth of personal service that large firms struggle to maintain.
“As corporate clients themselves have told us, responsiveness and relationship continuity trump sheer size.”
