The Financial Conduct Authority (FCA) published its market study into the pure protection market and noted that while it would not heavily intervene in practices, it would be addressing the low take-up of protection policies.
Erika Parker, actuarial director at Broadstone, said the report was positive and suggested the regulator felt that the market was “functioning well” despite the potential to close the protection gap.
Parker said: “Better product promotion to help build consumer awareness and understanding of the value of protection products will be critical, particularly at key life events such as buying a house or having a child. A smoother sales process and innovation in payment offerings could also build product ownership.”
She continued on to say that a growing protection market would be “critical” in supporting people who rely on insurance when they are most vulnerable due to long-term ill health or bereavement.
Debbie Kennedy, CEO of LifeSearch, also described the report as “positive and constructive”, adding that it gave the sector the confidence to build on the “strong foundations” already in place.
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She also welcomed the regulator’s recognition of the role of intermediaries and advice, adding: “And we value the close engagement with the FCA throughout this process to build shared understanding and practical solutions.”
Kennedy said she was encouraged to see the commission model was acknowledged for its importance in helping to close the protection gap and deliver good outcomes, adding: “The protection gap remains a priority challenge for the industry and will require innovative, scalable solutions.”
Rob Clifford, chief executive of Stonebridge, said the FCA described the market as one that was working “extremely well” overall, and shared his firm’s concerns around the protection gap.
“Most consumers don’t have any protection at all, and a large proportion of them would benefit from it.
“For a long time now, the industry has been working hard to plug this protection gap, but there’s obviously still a lot more work to do. Our firm alone has invested millions of pounds on people and technology to enable more advisers to get quality protection advice to thousands more consumers. It’s a huge undertaking for the sector, and it’s fantastic that a spotlight is being shone on it here, with the regulator planning to provide pragmatic help,” Clifford said.
He added that adoption levels would not change overnight, and it would take a “concerted effort” from the FCA, insurers, networks and advisers to close the gap, but said: “The FCA should be congratulated for endorsing the existing distribution model, which is already equipped to take on this challenge without major reforms.”
Many issues in the protection market ‘sidestepped’
Conversely, James Daley, managing director of Fairer Finance, said the market study was “another missed opportunity” and said many of the issues in the market had been sidestepped, with the major headline being that the regulator would not take any action.
Daley said the government’s pro-growth agenda seemed to be an influence, adding: “It’s incredibly frustrating that the regulator has invested so much time and energy in both the protection and premium finance market studies – only to conclude that no action is necessary.
“These market studies were launched because of concerns about the way these markets were operating – yet the regulator has felt unable to follow through and take any action to address those problems.”
