FCA Consumer Research on Pure Protection: What the Interim Findings Tell Us About Outcomes, Value and Distribution

In January 2026, the FCA published interim findings from its Consumer Research Report on the pure protection market. The research, conducted independently by Thinks Insight & Strategy, builds on the FCA’s July 2023 market study terms of reference and provides an evidence base to inform the regulator’s next steps on improving consumer outcomes, accessibility and decision-making.

Alongside the main report, the FCA also published two technical annexes:

• Annex 1: Distribution and pricing analysis, including findings on loaded premiums, restricted panels and price variation across channels
• Annex 2: Review of value and fair value frameworks, focused on income protection and guaranteed acceptance over-50s products

Together, the findings provide early insight into how consumers experience protection products in practice and where firms may face increasing regulatory scrutiny as the FCA’s market study progresses.

Background

The pure protection market plays a vital role in helping consumers manage life events and financial shocks. However, previous FCA work, including the 2021 Evaluation of the Retail Distribution Review and the Financial Advice Market Review, raised concerns around clarity, value and distribution practices in protection products.

This latest research aimed to:

• understand how consumers navigate decisions to take out protection
• explore barriers to take-up
• assess how well consumers understand policy terms, risks and limitations
• evaluate how advised and non-advised distribution models impact consumer outcomes

These themes closely align with the Consumer Duty’s focus on consumer understanding, fair value and good outcomes, particularly in complex or emotionally driven purchasing decisions.

Key Findings from the FCA’s Consumer Research

The research highlights persistent challenges across understanding, engagement, value perception and distribution, with particular issues emerging in non-advised journeys.

1. Lack of Understanding and Product Complexity

Many consumers struggle to distinguish between life insurance, income protection and critical illness cover. Jargon, exclusions and detailed policy wording make product terms difficult to compare or assess meaningfully.

2. Low Confidence and Engagement

Consumers often lack confidence in assessing suitability, particularly where advice is not provided. Many reported feeling “sold to” rather than supported, especially in non-advised channels.

3. Barriers to Take-Up

Barriers included psychological discomfort when thinking about illness or death, cost perceptions that did not always reflect actual affordability, and mistrust driven by past poor experiences or unclear communications.

4. Advised vs Non-Advised Channels

Consumers purchasing through advised channels generally felt more reassured and better informed. In contrast, non-advised journeys frequently led to uncertainty, particularly around exclusions, limitations and claims processes.

5. Consumer Perception of Value

Value is often interpreted emotionally, such as peace of mind, rather than analytically. The research highlighted a recurring mismatch between consumer expectations and the cover actually received or understood.

6. Switching and Retention

Some consumers lapse or cancel cover due to affordability concerns, disengagement after purchase, or limited understanding of the benefits provided.

7. Claiming

Many consumers lack clarity on how and when to claim, particularly those who purchased through non-advised journeys. Confusion around exclusions and claims processes contributes to uncertainty and potential consumer detriment.

Insights from the Technical Annexes: Product Value and Distribution

The technical annexes provide important context on how firms assess value and how distribution models influence consumer outcomes.

Income Protection Products

Income protection products displayed the lowest claims ratio and the second-highest margin among the products analysed. Higher complexity, ongoing payouts and capital intensity increase costs and reduce claims ratios when compared to lump-sum products. Consumer understanding remains limited, particularly around waiting periods and exclusions.

Guaranteed Acceptance Over-50s Products

These products are designed for consumers unable to access underwritten alternatives due to age or health. While some consumers may pay more in premiums than they ultimately receive in payouts, many value the certainty and simplicity offered. Fair value assessments show tipping points vary, and most policies pay out more than the total premiums paid.

Fair Value Assessment Practices

The FCA observed wide variation in how firms define and apply value metrics. Approaches include claims ratios, commission analysis, profit margins and RAG-based frameworks. Monitoring the impact of distribution on value is inconsistent, with some intermediaries providing descriptive evidence only, while others benchmark cost against commission.

FCA Next Steps

The FCA has not published formal remedies alongside this report but is exploring options such as extending targeted support and encouraging innovation that prompts consumers at key life moments. These insights will inform the FCA’s broader pure protection market study.

The original July 2023 Terms of Reference set out that the market study could lead to further outputs, including regulatory proposals, where features of the market are found to cause consumer harm. While no formal actions have been proposed at this stage, the FCA is expected to:

• identify where further research or market data is required to assess risks more fully
• consider how the Consumer Duty, particularly the outcomes on understanding and fair value, applies across protection journeys
• explore regulatory or non-handbook interventions to improve clarity in disclosure, suitability and distribution

While no immediate action is required from this report alone, it clearly signals the FCA’s direction of travel and areas of focus. The FCA aims to publish its final report in Q3 2026, including final findings, feedback and next steps.

What Should Firms Do Now

• Firms should use this interim report as an opportunity to reflect on current practices and prepare for potential future developments:
• Review product literature and sales processes for clarity, comparability and accessibility
• Assess customer experience across advised and non-advised journeys
• Re-evaluate how value is defined and evidenced across product lines and distribution chains
• Ensure fair value assessments meet PROD 4 requirements and reflect different customer cohorts
• Monitor developments in the FCA’s market study and prepare for potential regulatory proposals

Firms may also submit feedback on the findings and potential remedies to PureProtectionMS@fca.org.uk by 31 March 2026.

We work with insurers, MGAs and intermediaries to translate regulatory expectations into practical solutions. Supporting firms to:

• conduct fair value and distribution reviews aligned with Consumer Duty and PROD 4
• assess advised and non-advised customer journeys for compliance and clarity
• refresh disclosure documents and sales materials in line with FCA expectations
• prepare for potential regulatory remedies and engage confidently with the FCA

To discuss how these findings may affect your protection propositions, contact us for a briefing or targeted review.