"There is no doubt that the FCA is asking many of the right questions. The impact of commission on sales strategy and adviser remuneration is the most sensitive and is, of course, closely related to the issue of unnecessary policy replacement."
- Martin O’Connell, founder of The Protection Revolution
Earlier this week, the Financial Conduct Authority (FCA) published an update on its protection market study after issuing requests for information (RFI) to over 30 insurers and intermediaries.
It has asked firms to provide information on sales, distribution strategy, commissions, the nature of competition, and consumer outcomes. This will be used to examine concerns listed in its terms of reference, including competition constraints on insurers and intermediaries.
“There is no doubt that the FCA is asking many of the right questions. The impact of commission on sales strategy and adviser remuneration is the most sensitive and is, of course, closely related to the issue of unnecessary policy replacement.
“For me, the question that is missing concerns the quality of advice and the level of professional qualifications required by advisers,” Martin O’Connell, founder of The Protection Revolution, told Protection Reporter.
The FCA expects to complete its review and analysis of RFI responses in Q3 2025.
In terms of consumer research, the regulator is exploring consumers’ experience of purchasing pure protection insurance products and the outcome – distribution channels and consumer demographics will be assessed. It expects to complete this research in early August 2025.
To keep stakeholders informed, the FCA intends to publish at least two papers in Q3 2025, ahead of an interim report at the end of this year. These papers will set out a factual overview of the (retail) protection market in the UK, as well as findings from its consumer research.
In August 2024, the industry watchdog announced its intention to launch a market study into how pure protection insurance products are sold, following concerns that competition is not working well in the market.
Coincidentally, Aviva completed its acquisition of AIG Life UK for consideration of £453mn less than six months before the regulator announced these competition concerns.
READ MORE: Aviva completes AIG Life UK acquisition
The regulator launched its market study in March 2025, examining whether:
- the structure of commission encourages advisers to suggest switching that may not be beneficial for customers,
- premiums are being raised by insurers to pay a higher commission to an intermediary,
- the products provide fair value,
- the market supports innovation and growth
It will also look at the influence of other market participants, such as reinsurers, portals, research firms, and lead generators, on distribution.
The market study will focus primarily on the sale of four products – Term Assurance, Critical Illness Cover (CIC), Income Protection (IP), and Whole of Life (WOL). The FCA has confirmed that Private Medical Insurance (PMI) is out of scope, as well as funeral plans and Accident, Sickness & Unemployment (ASU) products.
According to the Protection Distributors Group (PDG), the last review of the protection market by any UK financial regulator occurred in the same year as the ‘Big Bang’.
The 1986 Big Bang refers to the sudden deregulation of financial markets, caused by an agreement between Margaret Thatcher’s government & the London Stock Exchange to settle a wide-ranging antitrust case that had been initiated by the Office of Fair Trading under the Restrictive Trade Practices Act 1956.
The FCA’s latest Regulatory Initiatives Grid, released in April 2025, revealed ‘several pieces of analysis, on specific subjects, to share [the FCA’s] latest thinking’, with ‘key milestones’ should be expected at the end of this year and in 2026.
