We’ve responded to the Financial Conduct Authority’s draft Terms of Reference for a market study into the distribution of pure protection products to retail customers. We welcome this study and the opportunity that it brings to make this part of the market fairer for everyone. 
 

Pure protection products are a key safety net, which can help people to weather the financial shocks and life events that can otherwise tip us into financially vulnerable circumstances. We are thinking here about products like term assurance, critical illness cover, income protection insurance, and life insurance. 

At present, the pure protection market does not sufficiently cater for some of the most vulnerable groups in society, including those on low incomes, in precarious employment or poor health. In our response, we suggest that the scope of the market study should be extended to ensure that the needs and requirements of these groups are addressed.  

“Analysis of our customer segmentation shows us that 24% of people in financially vulnerable circumstances do not hold a single insurance or protection product, compared to a national average of 16%. Uptake of protection products is much lower than in general insurance, and our most vulnerable segments and young people in particularly are least likely to have the cover they need.  A combination of access issues, lack of affordable or appropriate options and payment methods mean that the pure protection market is not currently working effectively for many consumers and especially those in financially vulnerable circumstances.”    

Jake Attfield, Head of Strategy and responsible for insurance engagement at Fair4All Finance

In our response we recommend that the market study: 

• should not just look at whether the market is functioning well for current consumers but also consider the groups that are currently excluded from, or underserved by, the market.   

• imagines a target market where everyone has access to a suite of fair and affordable products that are appropriate for their needs   

• considers that people in financially vulnerable circumstances tend not to have access to independent financial advisors. There is therefore an important role for trusted intermediaries such as credit unions and community groups in this space.  

We believe that with these changes to the scope, the market study would provide valuable information and direction on how the industry could develop more appropriate and affordable products and services to more consumers. To achieve this, providers should ensure that they follow inclusive and accessible design practices in their product and customer journey development to ensure good outcomes for society as a whole, and not just specific (income) groups targeted by existing products.