The Financial Conduct Authority has published the first of two papers before its interim report, due at the end of 2025. The paper mentions the FCA’s concerns regarding product churn and loaded commissions.
The Financial Conduct Authority (FCA) is the UK’s financial regulator and watchdog. Since August 2024, it has been looking closely at the pure protection insurance market, after concerns were raised about policy mis-selling, product ‘churn’ and ‘loaded’ commissions. An official review began in March 2025, and this paper presents comprehensive background information about the insurance industry and establishes a firm footing for their ongoing work.
Protection insurance includes critical illness cover, mortgage protection insurance, and life insurance, which many people pay for years. A mis-sold policy could end up costing the policyholder thousands of pounds, without offering the right insurance cover for their needs. Since the introduction of Consumer Duty in 2023, the FCA’s emphasis has been on ensuring that regulated financial businesses operate in their customers’ best interests and offer fair value.
The recently published FCA paper outlines “factual detail, including on the main products, customers, distribution channels, firm participants, regulatory landscape and market developments.” The FCA added, “Judgments about how well the market is working will follow in the interim report.”
The paper clearly sets out the current state of play in the protection insurance market. The FCA’s next steps will include:
- A review of consumer feedback from 1000 recent purchasers of protection insurance.
- Investigating the reasons for protection gaps (why people don’t or can’t buy insurance).
- A review of how people buy insurance – for example, directly, via an intermediary, or through a portal or comparison site.
- Investigating wider industry practices and how they affect consumer outcomes. Specifically mentioned are loaded premiums and adviser commission structures.
The paper concluded:
“All of this work will inform our ongoing engagement with market participants and be reflected in the interim report around the end of the year, which will assess how well the market is functioning.”
What are the FCA’s concerns about how well the protection insurance market is working?
+ −Concerns that have been raised about the protection insurance market include:
- Product churn: this is when customers are advised to replace their existing policies with a new one, just so the adviser can collect another commission. The new policy may not offer the same level of cover or contain the same definitions of medical conditions.
- Loaded premiums: the same insurance policy may cost more when purchased through one adviser, compared to another. The price difference is due to the commission the adviser receives, or the level of ‘discount’ negotiated with an insurance underwriter. Some advisers ‘load’ the monthly or annual premium with additional cost, with some sources saying up to 30% more. It may not have been explained clearly to the customer that the money goes directly to the adviser, for example, to cover their ongoing training costs.
These practices could be considered to be unfair to consumers, as they do not receive any additional insurance cover benefit for the extra money they pay, and so may amount to insurance mis-selling.
What is protection insurance mis-selling?
+ −Protection insurance mis-selling happens when people are pressured into buying cover they don’t need, aren’t told about exclusions or rising premiums, or are tied into costly, inflexible terms.
Other forms of mis-selling include:
- Policy ‘churn’: when advisers push unnecessary policy switches to earn extra commission.
- ‘Loaded premiums. where hidden fees are added.
Some advisers have even sold policies without the customer realising, whilst in other cases, people are wrongly told that life insurance is required for a loan or mortgage.
TLW Solicitors’ view
+ −Sarah Spruce, Legal Director at TLW Solicitors, says:
“Given that the FCA is already concerned about several aspects of the protection insurance market, and the depth of the current review, questions will be asked whether financial services have a major problem, and protection insurance mis-selling could even be as significant as the widely reported car finance scandal.
Depending on the outcome of the final report due next year, there may be changes to how the market operates and is regulated. Ultimately, everyone wants to be sure that life insurance, critical illness cover and income protection insurance meet customers’ needs and offer value for money.
For those people who feel that they or a loved one may have been mis-sold a policy, help is available. I would urge anyone concerned about these types of policies to contact the TLW specialist mis-selling team for a no-obligation and confidential discussion to explore the available options.”
What should I do if I have been mis-sold protection insurance?
+ −If you or someone you know has contributed to a life insurance, mortgage protection or critical illness policy and now question whether it was right for you, you are not alone and may be eligible for compensation.
TLW Solicitors represent clients on a ‘no win, no fee’ basis, focusing on consumer financial claims and refunds. Contact us to find out if you qualify to make a claim.
Please call us on 0191 293 1500 or complete one of the forms below.
It is important to get advice as soon as possible, as strict time limits can apply.
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