Mind the gap: why the FCA’s protection push matters, and what it will take to work

The FCA has launched a cross-industry push to close the UK’s protection gap. Nearly six in ten adults have no life insurance, critical illness cover or income protection, and most of them have never even thought about it. This is not a new problem. Regulators, consumer bodies and the industry have debated it for years with little to show for it. But the case for action is stronger than ever. The gap has widened significantly over the past decade, and rising living costs, growing debt stress and a cooling jobs market mean millions of households with little savings and no cover are one shock away from hardship.

The FCA’s call to action is welcome, and its recommendations are sensible as far as they go. There is no silver bullet. Real progress will need a package of measures built on three things: innovation in products, innovation in distribution, and a regulator willing to let firms take measured risks. None of that will work without trust. The FCA broadly found a market that works well for existing customers, but the industry cannot afford complacency. The PPI scandal showed how quickly trust in protection can collapse. Firms that go beyond minimum compliance, and embed good outcomes from the Board to the call centre, will be the ones that help close the gap.