Consumer Duty could be the protection industry’s best route to closing the gap

The Financial Conduct Authority (FCA) has published the final report of its Pure Protection Market Study (MS24/1.5). For most of the industry, the headline is a relief. The FCA isn’t planning new market-wide measures, though it will act where individual firms fall short, and is focusing instead on closing the protection gap. More than that, the FCA has put its weight behind something the industry has wanted for years: getting more of the UK population protected.

The FCA’s own research shows how big that task is. Nearly 60%of people don’t hold a pure protection product, and of those, 59% have never considered their protection needs. The interim report explained why: the protection gap exists primarily because consumers aren’t aware of their needs, and aren’t prompted to consider them.

Who does what

The FCA has set out a shared programme of work. The Money and Pensions Service and the Digital Property Market Steering Group will prompt consumers to consider protection at key life events, such as becoming a parent or buying or renting a home. The Protection Distributors’ Group (PDG) will lead a consumer awareness campaign aimed at groups less likely to take out protection. The Association of Mortgage Intermediaries (AMI) will lead work to help advisers improve how they discuss protection with customers. The FCA expects this work to begin by the end of 2026, with meaningful progress over the following 12 to 18 months.

It’s good to see the PDG and AMI taking this on. It’s also encouraging that the PDG has said it isn’t looking for a one-off awareness campaign, but for collaboration across insurers, distributors, intermediaries, trade bodies and consumer organisations. The instinctive response to a gap like this is another marketing push: promote protection, and educate the parts of financial services that don’t currently engage with it. We’ve been here before. There’s a line, usually attributed to Einstein, about repeating the same thing and expecting a different result. Whoever said it, it applies.

A different starting point: customer vulnerability

I’d like to put forward another route, and it’s one every regulated firm is already obliged to travel. Consumer Duty, read with the FCA’s vulnerable customer guidance, expects firms to identify and support customers with characteristics of vulnerability, and to monitor and evidence the outcomes those customers receive.

The FCA’s Financial Lives survey shows how many people that covers. 26.4 million adults had characteristics of vulnerability in May 2024 – 49% of all UK adults. Vulnerability isn’t fixed, and most of us will move in and out of it over our lives. With around half of customers affected at any one time, the only reliable way to find them is to assess every customer rather than wait for them to disclose it. Consumer Duty applies right across financial services, so assessing customer vulnerability reaches most of the UK adult population.

This matters for protection because a vulnerability assessment is, in effect, the first step of a financial resilience assessment. The FCA’s guidance on the fair treatment of vulnerable customers (FG21/1) identifies four drivers of vulnerability: health, life events, resilience and capability. A good assessment asks about health, lifestyle and financial resilience, which are exactly the questions that open a protection conversation. And the need is wide: 13.1 million adults, 24% of the population, had low financial resilience in May 2024.

So Consumer Duty and its vulnerability requirements could act as the prompt the FCA says is missing – the initial disturb. It won’t produce an immediate sale. It plants the idea that financial resilience is something people can manage and improve, and protection is one of several ways to do that.

Protection is a financial inclusion issue

The protection gap is part of a wider problem. HM Treasury’s Financial Inclusion Strategy makes financial resilience through insurance one of its six pillars. It also recognises that those most exposed to financial loss are often the least likely to be insured. The FCA’s protection work targets renters, the self-employed and gig economy workers, people on lower incomes and people with pre-existing medical conditions. These overlap heavily with the groups the FCA’s data shows are least resilient, such as lone parents, low-income households and renters.

The Treasury Committee’s July report on the Strategy warned that pilots and voluntary action can’t drive a national strategy without clear routes to scale. Most interventions start small and hope to grow. Customer vulnerability assessment is different, because Consumer Duty already requires it of every regulated firm. The FCA told the Committee that it can’t mandate firms to serve particular groups of consumers. It can, however, expect firms to understand their customers’ circumstances and act on what they find. That reach already exists, and the protection industry doesn’t need to build it.

Firms are already assessing financial resilience as part of Consumer Duty and acting on what they find. One example, separate to protection, is helping customers claim benefits they’re entitled to: Policy in Practice estimates that £24.1 billion of income-related benefits and social tariffs will go unclaimed across Great Britain in 2025/26.

Two objections, both answerable

When I raise this, I tend to hear two responses. People inside the protection industry say ‘just send us the leads’. People outside it say customers won’t engage with a vulnerability assessment if they think a protection salesperson will be on the phone the next day.

Both concerns are real, and both come from the same place: too much focus on the immediate sale. Handled well, a vulnerability assessment is about understanding and support, and customers need to be able to trust that. A protection conversation should follow only where there’s a genuine need, at a pace that suits the customer. Sometimes the right answer will be advice that doesn’t involve a protection product at all.

Playing the long game

The FCA has framed the protection gap as a question of engagement, and I agree. The goal should be better financial resilience for every consumer, with protection as one important part of it. Firms are already building customer vulnerability assessment into their journeys to meet Consumer Duty. If the protection industry works with that, rather than around it, it will reach people in a way that no awareness campaign will.

The next checkpoints are close. The FCA will publish its next Financial Lives findings in early 2027, and the Financial Inclusion Strategy’s two-year review is due in November 2027. Firms that are assessing their customers properly will have the evidence to show what’s changed. They’ll also be better placed to show that their customers are more resilient as a result.