A probe is to be launched into the pure protection insurance market over concerns around commission agreements and poor value.
Britain’s Financial Conduct Authority will begin a market study over the coming months into how pure protection products, such as life insurance which provides cover in the event of death, are sold.
Some £4 billion was paid out in such claims in 2022, according to the FCA, with the insurance mainly being sold through brokers or independent advisors.
“The design of commission arrangements may not allow firms to deliver good outcomes to policyholders,” the FCA said in a statement.
“The regulator is also concerned that some products may be providing poor value, for example, if the total premiums paid over a lifetime far exceed the maximum conceivable payout.”
Work will take place to gauge consumers’ understanding of such products, competitive restraints in the market and whether commission agreements create a conflict of interest.
“Consumers should be able to buy products which meet their needs and provide fair value,” FCA executive consumer director Sheldon Mills added.
“We have seen indications that this may not be the case across the pure protection market and we will act if we find that the market is not working well.”