UK Financial watchdog targets fairness in pure protection products

UK Financial watchdog targets fairness in pure protection products
Credit: REUTERS/Toby Melville

London (Parliament Politics Magazine) – The UK financial watchdog is to analyse whether insurance firms are ripping off “vulnerable” customers who take out procedures designed to financially cover them and their families in case of severe illness or death.

Are Insurance Firms Exploiting Vulnerable Customers?

The Financial Conduct Authority (FCA) plans to launch a market investigation into pure protection products, which are developed to help individuals and their families with their finances should a policyholder pass or be unable to cover financial obligations, after becoming concerned about how such approaches are being sold.

Almost £4bn was paid out in claims in 2022, according to the FCA. The regulator stated that the commission structures for the sale of some products, which are mostly sold through intermediaries such as mortgage brokers or separate financial advisers, may not be structured fairly.

How Fair Is the Value of Protection Products?

The FCA stated that it also had situations over “poor value” for consumers, including the amount of total premiums spent over the lifetime of a policy “far exceeding” the maximum possible payout. “Pure protection can present peace of mind and financial security, usually when people are at their most vulnerable,” stated Sheldon Mills, the executive director of consumers and competition at the FCA. “We have noticed indications that this may not be the issue across the pure protection market and we will function if we find that the market is not working well.”

The FCA expressed the first step in assessing the state of competitive practices in the pure protection sector was a market analysis to explore the consumer experience and performance of the products they were buying.

Which Pure Protection Products Are Under Scrutiny?

The watchdog will also glance at the “competitive constraints” on insurers and intermediaries with “potential conflicts of interest in the commission structure”. The financial watchdog will concentrate primarily on the sale of four types of pure protection products: term assurance, essential illness cover, income protection insurance and whole-of-life insurance, including guidelines for over-50s that offer guaranteed acceptance. “Consumers should be able to buy products which meet their needs and provide fair value,” Mills stated.

Daniele Naddei

Daniele Naddei is a journalist at Parliament News covering European affairs, was born in Naples on April 8, 1991. He also serves as the Director of the CentroSud24 newspaper. During the period from 2010 to 2013, Naddei completed an internship at the esteemed local radio station Radio Club 91. Subsequently, he became the author of a weekly magazine published by the Italian Volleyball Federation of Campania (FIPAV Campania), which led to his registration in the professional order of Journalists of Campania in early 2014, listed under publicists. From 2013 to 2018, he worked as a freelance photojournalist and cameraman for external services for Rai and various local entities, including TeleCapri, CapriEvent, and TLA. Additionally, between 2014 and 2017, Naddei collaborated full-time with various newspapers in Campania, both in print and online. During this period, he also resumed his role as Editor-in-Chief at Radio Club 91.
Naddei is actively involved as a press officer for several companies and is responsible for editing cultural and social events in the city through his association with the Medea Fattoria Sociale. This experience continued until 2021. Throughout these years, he hosted or collaborated on football sports programs for various local broadcasters, including TLA, TvLuna, TeleCapri, Radio Stonata, Radio Amore, and Radio Antenna Uno.
From 2016 to 2018, Naddei was employed as an editor at newspapers of national interest within the Il24.it circuit, including Internazionale24, Salute24, and OggiScuola. Since 2019, Naddei has been one of the creators of the Rabona television program "Calcio è Passione," which has been broadcast on TeleCapri Sport since 2023.