FCA's Final Pure Protection Report Confirms 58% of People Hold No Cover and Opts for Industry-Led Measures Rather Than Broad New Regulation

The UK's Financial Conduct Authority (FCA) has completed its market study of pure protection insurance, concluding that the market works well for people who already have cover but leaves a large share of adults with none. The final report, numbered MS24/1.5, was published on September 21, 2026, according to the FCA's market study page, which was last updated on October 2, 2026. This follows an interim report published on January 29, 2026, and a study launched on March 21, 2025, after terms of reference were finalised.

Pure protection means insurance that pays out on a defined event: term assurance and whole-of-life cover pay on death, critical illness cover pays on diagnosis of a specified condition, and income protection replaces part of a person's income if they cannot work. These products are different from savings or investment-linked life insurance, because they have no investment component and their cost reflects the risk covered.

The central finding is a protection gap. The FCA says 58% of people hold no protection products, and 59% of those people have never considered their protection needs. The regulator links the gap to limited consumer awareness and to challenges in the sales process that make access difficult. In the January interim announcement, the FCA also named ability to pay and misunderstandings about products as factors, and said it would work with industry to reduce the gap. In its interim report, as summarised by law-firm and consultancy commentary, the FCA added that people with pre-existing medical conditions can find it hard to obtain standard cover, and that the gap is inherently hard to measure.

On the other side of the ledger, the FCA says competition generally works well for those who hold cover. There is a wide range of products, and claims acceptance rates are high. The interim report described complaints as low and insurers' projected margins as modest overall. Claims ratios, meaning the share of premium paid out as claims, were generally around 50% or above for most products, with income protection lower at around 40%. Price dispersion between providers is significant, which the FCA attributed to product complexity, risk-based pricing and differences in features.

The FCA chose not to impose heavy remedies. According to the market study page, the response will be a package of measures by the FCA, industry and other stakeholders, using existing frameworks rather than broad new regulation. The January interim report had not proposed commission caps, product bans or pricing interventions, and had instead pointed to prompts or trigger points that encourage consumers to think about cover, targeted support for people who struggle to access standard products, and better data collection and monitoring.

Distribution was one area of regulatory concern. Many protection policies are sold through intermediaries paid by commission, and the FCA examined whether commission arrangements encourage unnecessary switching. When a customer moves to a new policy after the period in which commission can be clawed back has ended, the intermediary can earn commission again. The interim report said that the FCA could not rule out that such structures encourage switching, estimated that any resulting harm appears small at current levels, and wanted better switching data. It also noted that some intermediaries use commission on new sales to cover clawback debts and that insurers write off some of this debt, which the FCA wants to monitor. The regulator found no evidence of high intermediary profitability overall. It also noted good practice at the point of sale, such as arranging policies in trust and setting up wills and powers of attorney, and said it was considering encouraging it further. The FCA stressed that distribution and commission arrangements must not undermine fair value or customer choice.

The timeline after the final report is specific. Engagement with industry begins from October 2026. Work and industry-led actions are due to start by the end of 2026, and the FCA expects meaningful progress within 12 to 18 months. A TechSprint, a collaborative event where firms and the regulator test technology ideas, is planned for the third quarter of 2027, subject to sufficient interest. Expressions of interest are due by November 13, 2026, and the FCA says it will confirm by the end of 2026 whether it will proceed.

Graeme Reynolds, the FCA's director of competition and interim director of insurance, said in January: "We will work with industry to reduce this gap, to help consumers navigate their financial lives." The final report keeps that collaborative approach.

What does this mean for consumers? Nothing changes immediately for existing policyholders, and no new price controls are coming. Over the next year or two, people may see more prompts to consider cover at key life events, such as buying a home, starting a family or taking out a mortgage, if the industry-led actions follow through. People who have been unable to find affordable cover because of health conditions are a group the regulator highlights, though the sources reviewed do not describe specific new products.

For firms, the message is to expect continued scrutiny of fair value, sales practices and commission structures, even without new rules. The FCA published fair value assessments, with positive examples and areas for improvement, as an annex to the report, and the Consumer Duty continues to apply. Firms that wait for formal rules may find that supervisory expectations arrive first.

Whether the protection gap narrows will be visible in later surveys of cover, and the FCA's commitment to engage with industry from October 2026 and to see progress within 12 to 18 months gives a date to measure against.