Concerns about whether protection insurance is being mis-sold have prompted a review of the sector.
The Financial Conduct Authority (FCA) plans to launch a study into the products, including whether consumers fully understand what they are buying.
It also aims to look at how commission on the sale of products is paid and whether there is any potential conflict of interest in the way such payments are structured.
The authority is concerned that the current way commission is paid to brokers who sell the product may not produce the best results for customers.
There are concerns that the products can be poor value – for example, in circumstances where the total amount of premiums paid during the course of a lifetime is significantly more than the maximum payout.
Concerns about which protection products to choose
The so-called ‘pure’ protection products are designed to help individuals and their families with their finances should the person who bought the policy die or become unable to meet their financial commitments.
Around £4bn was paid out in claims in 2022, according to the FCA.
The authority aims to focus mainly on the sale of four specific types of protection product in its review.
These include term assurance, critical illness cover (CIC), income protection insurance and whole-of-life insurance such as policies for over-50s that offer guaranteed acceptance.
Meeting customer needs
Sheldon Mills, executive director of consumers and competition at the FCA, said: “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 [that] meet their needs and provide fair value.
“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.”
