Pure Protection: Regulatory expectations intensify in 2026

What happened?

The Financial Conduct Authority (FCA) has issued its Interim Report on the Pure Protection Market Study, following data requests from 30 major insurers and intermediaries. The study focuses on fair value, commission structures, panel agreements, and digital accessibility across the pure protection distribution chain.

While the review noted positive progress in claims payout rates, it raised serious concerns over wide protection gaps, limited accessibility for vulnerable consumers, and opaque panel and commission arrangements.

Why does it matter?

Pure protection has historically escaped the strict commission disclosures mandatory in other sectors, but this study signals a major shift. With indemnity commission models, clawback terms, and restricted panels under scrutiny, the regulator is evaluating whether these commercial structures distort advice suitability and premium pricing.

Importantly, while the study is forward-looking and not an enforcement review, its final recommendations in Q3 2026 are highly likely to introduce rigid new rules around commission transparency and panel disclosures.

Who is affected?

Protection insurers, life assurance companies, non-workplace pension distributors, price comparison websites, and protection intermediaries are directly affected.

Key risks

Firms face key compliance and business model risks if they fail to adapt:

• Severe disruption to commercial distribution models if indemnity commissions are restricted or capped.
• Regulatory action for failing to show that panel selections and recommendations serve the customer’s best interests.
• Failing to provide accessible, plain-English information to customers, particularly those with vulnerable characteristics.

Actions to take

With the final report due in Q3 2026, firms should not wait for final conclusions. The FCA has been clear that fair value cannot be judged on price alone, but on whether products meet genuine customer needs, are supported by transparent pricing and remuneration, and deliver good outcomes throughout the customer lifecycle. 

Firms should act now to: 

• Review product governance and distribution strategies across advised and non-advised channels

• Assess whether incentive and commission structures are driving appropriate outcomes

• Revisit fair value assessments, particularly for vulnerable customer cohorts

• Improve the clarity and timing of customer communications

• Strengthen management information to evidence outcomes across channels, journeys and customer types

• Consider lessons from the FCA’s Roadmap for Retail Insurance 

The message from the FCA is consistent and clear: firms that can evidence strong governance through data, transparent remuneration and demonstrably good customer outcomes will be best placed as regulatory expectations continue to rise. 

Wider implications

The pure protection market is the latest area to feel the impact of the outcomes-based Consumer Duty. The regulator’s focus on information asymmetry suggests that the entire retail protection distribution chain will face structural reform to eliminate hidden incentives.

Recommendations

We recommend conducting a proactive audit of your distribution partners’ sales practices and establishing robust, evidence-backed fair value assessments for all protection products.