We have launched a market study into the distribution of pure protection products to retail consumers.
The Terms of Reference set out why we are doing the market study, its scope, the key issues we'll explore, the potential outcomes that our work might lead to, and our next steps.
They incorporate feedback on the proposed Terms of Reference published in August 2024. Feedback came from our engagement with over 50 insurers, intermediaries, trade associations, consumer bodies, re-insurers, portals, research firms and lead generators.
Read the Terms of Reference (PDF)
Pure protection products are designed to help an individual, and/or their dependents, with existing financial commitments or lifestyle adaptations if the policyholder dies or becomes incapacitated, injured or infirm. They include term assurance, critical illness cover, income protection insurance, and whole of life insurance including both underwritten whole of life insurance and guaranteed acceptance over 50s plans.
Pure protection products are important. Consumers rely on them to provide financial resilience, often when particularly vulnerable. In 2023, approximately £4.85bn was paid out in pure protection claims on individual policies, aiding those affected by bereavement, illness, and injury.
The main distribution channel for pure protection products is through intermediaries, both on advised and non-advised bases. This approach can be cost-effective for insurers and allows consumers to benefit from intermediaries’ expertise and market access.
We are launching a market study into the distribution of pure protection products to consumers acting in their personal capacity. We will examine whether the distribution of pure protection products works well against our operational objectives, including whether competition works in the interest of consumers. If the distribution of pure protection products is working well consumers should be able, for example, to buy products and services that meet their needs, provide fair value, and supports them in making timely, well-informed decisions.
We observe positive indicators in pure protection, including a relatively low number of complaints received by the Financial Ombudsman and, according to published Association of British Insurers (ABI) data, over 95% of new consumer claims being paid out on some products (eg term assurance).
There are also indications that distribution of pure protection products may not be fully effective. We will examine the incentives created by commission structures, competitive constraints on insurers and intermediaries, and the influence of other market participants (such as re-insurers, portals, research firms and lead generators) on distribution. We will also explore any potential barriers to innovation and investment.
We will also assess whether the consumer outcomes that we observe align with those expected under the Consumer Duty and/or our PROD rules. Concerns include unnecessary consumer switching driven by intermediaries, commission practices that may not represent fair value (eg raising premiums to pay an intermediary higher commission), and fair value issues with some products (eg guaranteed acceptance over 50s insurance). Some studies also suggest a substantial protection gap in pure protection products.
Publication of the Terms of Reference marks the launch of the market study. We expect to publish an interim report with our initial findings and proposed next steps around the end of 2025.
During 2025, we plan to publish several pieces of analysis, on specific subjects, to share our latest thinking. We will also keep stakeholders updated via engagement individually and via trade associations.
If the distribution of pure protection products is not working well against our operational objectives, including our competition objective, we will consider whether any improvements are needed on a forward-looking basis. This is in particular to support competition that delivers innovation and investment and to make sure the market works well for consumers. Market studies are forward-looking and do not examine past conduct of individual firms or set out to establish the basis for redress.
Following a pilot, we issued requests for information (RFI) to a sample of over 30 insurers and intermediaries.
We asked firms to provide information about sales, their distribution strategy, commissions, the nature of competition, and consumer outcomes. We will use the information to examine many of the concerns listed in our terms of reference such as:
We are currently receiving and processing RFI responses. We expect to complete much of our review and analysis in Q3 2025.
Our consumer research is in progress. We are exploring consumers’ experience of purchasing pure protection products and the outcome, considering differences between different types of consumer and distribution channel. This is to help us assess how confident and effective consumers are at selecting and purchasing protection products. We expect to complete our consumer research in early August 2025.
To keep stakeholders updated and to give stakeholders an early opportunity to engage with our analysis, we intend to publish at least two papers in early Q3 2025, ahead of our interim report scheduled for the end of the year. These will include:
If you want to get in touch with us about the market study, please contact [email protected].