Insurers and Advisers Quizzed by FCA About
Protection Insurance Market

The FCA announced its review of the protection insurance market following claims of mis-selling life insurance, term assurance, critical illness cover and income protection insurance. Some policies may not offer fair value to policyholders. Issues highlighted include commission structures, product churn and loaded premiums, each of which can cost the policyholder more in the long term and could even amount to mis-selling.

Protection insurance mis-selling can arise when consumers are:

• Pressurised into buying a policy, something a reputable adviser would never do.
• Advised to buy an unsuitable or unnecessary policy.
• Unaware that they had ever been sold a policy.
• Not advised properly of limitations, fees or commissions, including ‘loaded’ commissions or premiums relating to the policy.
• Unaware that policies were reviewable, and premiums could increase, or benefits decrease, over time.

‘Loaded premiums’ is the term used when a customer pays more for an insurance policy than is required to purchase that level of cover. The extra money pays for the broker or adviser’s commission or ongoing training and could be as much as 15-30% of the monthly premium.

The FCA’s Consumer Duty, introduced in 2023, requires financial firms to act to deliver good outcomes for retail customers. Maximising commissions, rather than putting consumers’ needs first, does not align with the FCA’s rules.

Advice firms and intermediaries have recently been asked to provide detailed information on business models and commission rates for 2021 to 2024. The FCA said:

“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 the incentives created by commission structures, competitive constraints on insurers and intermediaries, the influence of other market participants on distribution, and potential barriers to innovation and investment.

We are currently receiving and processing requests for information responses. We expect to complete much of our review and analysis in Q3 2025.”

The activities of product comparison platforms and reinsurers have also been added to the review, and consumers have been quizzed on their understanding of the protection insurance sales process and their experience of purchasing pure protection products.

The findings from both the market overview and the consumer research are expected to be published later this year, with an interim report scheduled for the end of the year. Further work by the FCA will follow in 2026.

Sarah Spruce, Legal Director at TLW Solicitors, says of the FCA’s review:

“Protection insurance is something many people have, hoping they will never need. They may have held a policy for years but not remember everything it would or wouldn’t cover. The FCA’s concerns about mis-selling and mis-information in the industry have led to this widespread review, which is still gathering information and studying the responses.

‘Loaded premiums’ means many people will have paid more for their policies than they should, for no additional insurance cover. Over time, this can really add up. The FCA is also trying to find out how many customers may have been sold the wrong type of policy or been asked to switch policies when they didn’t need to, tactics used to boost an adviser’s commission. We await the review reports with interest.

Whilst the FCA conducts its review, my specialist colleagues at TLW Solicitors are here to help. If you believe that you have been mis-sold an insurance policy, get in touch for a free, confidential and no obligation discussion. Our experienced team can explore the options available to you, including whether you may be eligible to make a ‘no win, no fee’ claim.”

You may be entitled to compensation if you or a loved one paid into a protection insurance policy and now question whether it was right for you. Acting on behalf of clients on a ‘no win, no fee’ basis, TLW Solicitors specialise in consumer financial claims and refunds. Get in touch to see if you may be eligible to claim.