MS24/1.1: Pure Protection Market Study

The ToR explains the rationale for this market study, its intended scope, the issues we plan to explore, and next steps. We are not formally consulting on these proposed ToR but welcome any views on the intended scope of the market study and the issues we plan to explore.

Read the proposed Terms of Reference (PDF)

Introduction

Pure protection products are designed to help an individual and/or their dependents with existing financial commitments or lifestyle adaptations if the policyholder dies or becomes incapacitated, injured or infirm. They include term assurance, critical illness cover, income protection insurance, and whole of life insurance including guaranteed acceptance over 50s plans. 

In 2022, over 19m individual pure protection policies were held by consumers in the UK.  

The main distribution channel for pure protection products is via intermediaries. Distributing via intermediaries can be a cost-effective way for an insurer to reach consumers, while consumers can benefit from intermediaries’ expertise and access to the market. 

Rationale for the proposed market study 

Consumers rely on pure protection products to provide financial resilience, often when they are in vulnerable circumstances, so it is a particularly important sector.  

We intend to launch a market study into the distribution of pure protection products to understand whether the market is functioning well and whether consumers are receiving good outcomes. In particular, we want to look at the design of some commission arrangements, whether some pure protection products provide fair value to consumers, and the strength of competition given the recent exit of several providers.

We intend to look at 4 products – term assurance, critical illness cover, income protection insurance, and whole of life insurance including guaranteed acceptance over 50s plans. We will focus on products purchased by individuals on their own behalf.

These ToR explain the rationale for this market study, its intended scope and the areas we plan to explore. The market study links to our wider work on the Consumer Duty (Duty), including price and value. We will consider whether the consumer outcomes that we observe align with those we expect to see under the Duty.

Give us your views

We are not formally consulting on these ToR. However, we welcome any views on the intended scope of the market study and the issues we plan to explore. Please provide any views to [email protected] by Friday 11 October 2024. 

Next steps 

We will engage with firms, industry groups and stakeholders to gather their views on these ToR and to begin discussions over what data we may need. We expect to start these discussions shortly.

We intend to launch this market study later in the financial year 2024/25. We will keep this timing under review as we consider other pending priorities. We will update the ToR when we launch the market study if there are any changes.

Any queries

If you have any questions about the market study, please contact [email protected].