CashNews.co
Wednesday 28 August 2024 7:53 am
The City regulator has announced a probe into the sale of pure protection insurance products amid concerns that “competition is not working well in the market”.
On Wednesday, the Financial Conduct Authority (FCA) expressed concern that some commission arrangements could result in poor outcomes for policyholders.
It added that it was worried some products may not be providing good value, like if the total premiums paid over a lifetime “far exceed” the biggest conceivable payout.
Pure protection products are meant to help customers and their families manage their finances if the policyholder cannot meet their financial commitments, often because of illness or death.
The FCA said its review, due to be launched later in 2024/25, would mainly focus on term assurance, critical illness cover, income protection insurance and whole of life insurance including policies for over 50s that offer guaranteed acceptance.
“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,” said Sheldon Mills, the FCA’s executive director of consumers and competition.
“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.”
The FCA said it would look into consumers’ engagement with and understanding of the products they are buying, the “competitive constraints” on insurers and their intermediaries, and possible conflicts of interest within commission structures.
In 2022, around £4bn was paid out in pure protection insurance claims. The products are mostly sold via intermediaries like independent financial advisers or mortgage brokers.