The FCA Says Millions Have No Protection. Is Your Business One of Them?
The FCA Says Millions Have No Protection. Is Your Business One of Them?
On 21 September 2026, the Financial Conduct Authority (FCA) published the final report from its Pure Protection Market Study.
It looked at how life insurance, critical illness cover and income protection are distributed to individual customers, and whether competition in that market is working in people’s interests.
The headline is fairly simple.
For people who already have protection, the market generally works well. The bigger concern is the millions of people who have none.
What did the FCA find?
The FCA found that competition in the distribution of pure protection generally delivers good outcomes for existing policyholders, with a wide range of products available and high claims acceptance rates.
It also looked at switching, claims experiences and fair value, and reminded firms of their responsibilities under the Consumer Duty and product governance rules.
The FCA isn’t planning broad new market-wide regulation as a result of the study, although it says it will take action where firms fall short of existing requirements.
One area the FCA has looked particularly closely at is income protection, which has historically had a lower claims ratio than other types of pure protection.
That doesn’t mean claims aren’t paid. Claims ratios are only one measure of value, and the FCA itself says they need to be considered alongside the benefits and features of the product.
For customers, the important point is simpler:
Understand the definitions, conditions and exclusions in your policy before you need to make a claim.
The UK’s protection gap
This is the statistic that really stands out.
58% of adults don’t hold life insurance, critical illness cover or income protection.
And of those people, 59% have never considered their protection needs.
The FCA describes this as the protection gap.
It is now working with industry, government and consumer groups to encourage more people to think about whether protection is appropriate for them, particularly at key points in life such as becoming a parent or buying or renting a home.
Subject to sufficient industry interest, the FCA also plans a TechSprint in Q3 2027 to explore technology-enabled ways of helping close the gap.
In practice, we’re likely to see more prompts, more conversations and more attention on how protection is explained.
What this DOESN’T mean for business owners
Let’s be clear about something.
The FCA hasn’t introduced a new rule saying business owners must have protection.
The study looked at individual retail protection products, not business protection as a category.
But the pattern it describes is one I recognise among company directors all the time.
It’s often not that somebody has decided against protection.
Nobody has ever really asked the question.
Why should company directors care?
A limited company gives you a legal structure.
It doesn’t remove the personal consequences if something goes wrong.
Company directors can have risks sitting somewhere between the business and their family, and they’re often the things that get pushed onto the “I’ll sort that later” list.
Ask yourself:
If you couldn’t work for six months, who would cover your income and your share of the workload?
If a co-director died, what would happen to their shares and who could own them next?
If you’ve signed a personal guarantee on borrowing, what could happen to that debt?
If a key person became seriously ill, what could the business lose in income, knowledge or skills?
If you died tomorrow, would your family know where the important business and financial documents were?
If you don’t immediately know the answers, that’s worth paying attention to.
Where can business protection fit?
There’s no single insurance policy called “protect my entire business.”
Different risks can require different solutions.
Key Person Insurance can provide the business with a payout if an insured person who is critical to its income or skills dies or, where included in the policy, suffers a specified serious illness.
Shareholder Protection can help provide funds for the purchase of a deceased shareholder’s shares alongside appropriate arrangements governing how those shares can be bought and sold.
Business Loan Protection can help a business repay certain borrowing if an insured person dies or, depending on the cover selected, is diagnosed with a specified serious illness.
Relevant Life Cover is an individual death-in-service style policy that can be arranged by an employer for an employee, including certain company directors. Tax treatment depends on individual circumstances, so appropriate tax advice may be needed.
Income Protection can provide regular payments if illness or injury leaves you unable to work, subject to the terms of the policy.
Every policy has its own terms, exclusions and underwriting requirements, and a claim isn’t automatically guaranteed to be paid.
What’s appropriate depends on your business, your borrowing, your co-owners, your family and the risks you’re actually trying to protect.
What should a good protection conversation look like?
It shouldn’t start with somebody trying to sell you a policy.
It should start with your business.
Who owns what?
What have you borrowed?
Who does the business depend on?
What would happen if one of those people suddenly wasn’t there?
Only then should the conversation move onto whether insurance is worth considering and, if it is, what type of cover could be suitable.
You should understand how the policy works, what it costs, what it covers, what it doesn’t cover and what happens if you stop paying.
And you should always be able to say no.
For some businesses, insurance won’t be the right answer. That’s a perfectly valid outcome.
Five things you can check today
You don’t need to wait for somebody else to prompt you.
Start with a quick audit:
List your borrowing and any personal guarantees.
Check who owns the shares and what agreements are in place.
Identify the people your business couldn’t easily operate without.
Work out what would happen to your own income if you couldn’t work.
Review any existing cover and check whether it’s still appropriate for the right amount, term and people.
That exercise alone can reveal where the gaps might be.
Then you can decide whether you need to do anything about them.
The question isn’t “Do I need insurance?”
For me, there’s a better place to start:
What would happen to my business and the people who depend on me if something went wrong?
The FCA’s latest research shows just how many people have never even considered that question.
If you’ve read this far, you’ve at least started.
If you’d like some help looking at the risks in your business and understanding what you already have in place, let’s have a straightforward chat.
Talk To O'Malley Financial Services is a trading style of Commercial Connect Limited, authorised and regulated by the Financial Conduct Authority (FCA No. 1021324). This content is for information only and does not constitute financial advice. Policies have terms and conditions and may not pay out in all circumstances. Tax treatment depends on individual circumstances and may change.
