The UK’s financial watchdog is investigating a £4bn insurance market following concerns it is not providing “fair value” for customers seeking financial protection in case of serious illness or death.
The Financial Conduct Authority (FCA) has announced it is launching a market study into so-called pure protection products, which are designed to help individuals and their families with their finances should the policyholder die or become unable to meet their financial commitment.
It said it had “concerns that the design of commission arrangements may not allow firms to deliver good outcomes to policyholders”.
The FCA said it was also worried that some products may be providing poor value – eg where a customer pays more for the product over a lifetime than the maximum possible payout.
Some £4bn was paid out in pure protection insurance claims in 2022, the FCA said.
The policies are mainly sold through independent advisers or mortgage brokers.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “Pure protection can offer peace of mind and financial security, often when people are at their most vulnerable.
“Consumers should be able to buy products which meet their needs and provide fair value. We have seen indications that this may not be the case across the pure protection market, and we will act if we find that the market is not working well.”
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