FCA: Protection market functions well, but 58% of adults lack any cover

Nearly six in ten British adults have no life insurance, critical illness cover, or income protection of any kind. The Financial Conduct Authority's Pure Protection Market Study, released this week, found that 58% of the adult population sits entirely unprotected—and the reason isn't that good products are hard to find or too expensive. It's simpler and more stubborn than that: 59% of those without cover have simply never thought about whether they need it.

For the people who do hold protection policies, the market works reasonably well. The FCA found that claims are accepted at high rates, complaints are low, and consumers have access to a broad range of products and distribution channels. The regulator's report suggests the machinery of the protection industry functions as intended for its existing customers. But that machinery sits idle for the majority of the population, which creates a peculiar regulatory problem: a market that performs well by traditional measures of conduct and value while leaving most adults exposed.

Where friction does emerge, it tends to affect people with more complicated circumstances. Underwriting can drag on. Medical evidence takes time to obtain. Application processes are cumbersome. The FCA also flagged that insurers could communicate more clearly about how claims actually work, and that they should be more transparent about ancillary services so they don't overshadow the core protection product itself. The regulator noted, too, that firms should consider the risk of economic abuse when recommending whether couples should hold joint or separate policies.

Ewen Tweedie, actuarial director at Broadstone, reads the FCA's findings as marking a subtle but significant shift in how regulators frame the problem. The issue isn't conduct or value anymore—it's engagement. The real weakness in the market, Tweedie argues, is that millions of people never pause to consider protection at all. That's a different problem from the ones traditional regulation typically addresses, which is why the FCA's decision not to extend targeted support mechanisms makes sense. Those tools work best for consumers already partway through a purchase decision, not for the much larger group who haven't started thinking about protection.

What might actually move the needle, Tweedie suggests, is the workplace. Auto-enrolment pension schemes have already demonstrated that the structure of employment can overcome consumer inertia—people accept what's automatically offered to them far more readily than they seek it out themselves. The same logic could apply to protection insurance. If simple protection products were built more consistently into workplace benefits, with new employees receiving protection information and prompts as standard, it could raise awareness and engagement at scale. More consistent claims statistics across the market would also help, giving advisers a level playing field for comparing providers and giving consumers clearer confidence in the value of protection generally.

The FCA's report doesn't suggest the protection market is broken. But it does identify a gap that voluntary awareness initiatives alone may not close. Tweedie's point is that participants across the value chain—government, employers, insurers, advisers—should think about how they can work together to make protection more accessible. The market functions well for those already inside it. The question now is how to bring the other 58% in.