3rd February 2026
Both market studies started out with clear intentions to address consumer harm. But the final premium finance report and the interim protection study show the FCA does not intend to follow through.
The FCA has published updates on two market studies over the last week – the interim report into the protection market and the final report into the premium finance sector.
Both of these were launched in the early days of the new Labour government – at a time when the FCA felt emboldened to use the momentum of its new Consumer Duty to iron out some long-standing market failures.
But as these pieces of work reach their conclusions (or interim conclusions) 18 months later – there’s no clearer indication of how the tide has shifted than the fizzle of these major pieces of work. In the months since these studies were launched, the FCA has been reminded of the importance of its new statutory objective to prioritise growth alongside consumer protection, competition and market integrity. Although this is meant to be a secondary objective, it has come to dominate over the last year – with almost all FCA speeches and consultations directly or indirectly speaking to the growth agenda rather than the other three primary objectives.
Today’s premium finance market study is not quite unprecedented but is certainly unusual – in so much as it has concluded with no new remedies being suggested. The paper celebrates the fact that the spotlight of the study alone has helped reduce interest rates in the sector. And that is of course good news. But the paper also points out that brokers are making profit margins of 40%. And with one of the biggest lenders in the market having recently withdrawn – it also concedes there’s a risk that reduced competition in premium finance could pave the way for a resurgence in prices. Nevertheless, the market has broadly been signed off with a clean bill of health.
Last week, the interim protection market study reached the half-way point with a similar conclusion. The main proposed remedies are about supporting the growth of the protection market – rather than addressing the pockets of poor value that were highlighted in the terms of reference.
It’s worth reminding ourselves how much things have changed in just two years. Back in January 2024, just a few months before the general election, we first got a hint that premium finance might be on the regulator’s radar when the FCA’s then head of insurance veered off-message and referred to it as a “tax on the poor”. He was right of course. Premium finance adds a significant cost on top of motor insurance – and is most often used by people who have no choice but to borrow, because they simply can’t afford to pay their motor premium in one chunk.
I’ve been round the arguments about the merits and failings of premium finance a few times before – and I appreciate that it’s not as simple an issue as it first appears. But sitting over the top of the whole debate is a social question – do we think it’s fair to charge more for a mandatory insurance to those who can least afford it?
I accept that answering this is beyond the remit of the FCA. But it absolutely was a question within the gift of the Government’s Motor Insurance Taskforce to answer. A bit like the premium finance market study, the Taskforce was set up in the early days of the Labour government – and was driven by the former Transport Secretary Louise Haigh, who was very exercised about the social fairness of compulsory motor insurance pricing.
Alas, both Haigh and her financial inclusion partner in crime – Tulip Siddiq – lost their jobs fairly early on. And as the Government’s pro-growth agenda built momentum, the Taskforce was directed by Treasury to side-step the very issue it was set up to address.
The final Taskforce report, published just before Christmas, contained essentially nothing to address the social issues in the insurance market. And when it came to premium finance, the report noted that this was being dealt with by the FCA’s market study. Indeed, the FCA publishing its market study in 2026 was listed as one of the “actions” from the report – which is a bit like ordering the sun to rise tomorrow and taking credit for it when it does.
By December, the Treasury already knew that the FCA was not going to tackle the social question of affordability. And having already published an interim report ruling out any radical action, it was clear that the FCA’s final market study report would not amount to any major change
In fairness to the FCA, it would have been hard for it to do anything radical in this market without the support of Government. But it is a great shame that it did not even do the full economic analysis to consider what the impact of a ban on premium finance would be. Although we know it would have pushed up prices for annual payers, it would have reduced them for most monthly payers. Without a cost benefit analysis of this intervention, we are none the wiser as to whether this would be a feasible intervention.
More broadly, the final market study paper looks to scotch the idea that people on low credit scores are penalised twice – once in terms of their credit price and once in terms of their premium. But this somewhat misrepresents the reality. While premium finance is generally not risk-based, the people who use it are less financially resilient and far more likely to have lower credit scores. Most insurers use credit score as a rating factor in a customers’ motor premium. So essentially, customers with low credit scores are still being penalised twice. Their premium is higher because they have a low credit score, and they are forced to pay interest on top of their premiums because they can’t afford to pay it all in one go.
Reading the premium finance market study only left me thinking that there is still an acute need for Government to take a look at how insurance is priced – and whether it is fair. But that is not currently on the agenda – either in Government or over at the FCA.
As for the protection market study – this was another piece of work that was launched with a view to rooting out excessive commissions, and stamping out bad outcomes at the edges of the market. When it was launched back in 2024, the paper specifically called out concerns about value in the over 50s market – and the strength of its concerns even led to Phoenix ditching its plans to sell Sunlife (the largest over 50s plan provider).
But in the interim report, in spite of identifying commissions of 390% in this market, and showing that over 50s looks to be pretty poor value next to underwritten whole of life policies, it decided to take no action.
One of the issues raised by many in the funeral plan industry is that the ban on commission in their sector has created an uneven playing field. Over 50s plans are often sold as a kind of funeral plan – yet they are generally far inferior products. However, because they can be sold with commission, they are much easier to distribute. Again, this issue was not touched upon.
And while the market study did at least finally jump Sunlife into including a premium cessation age on its over 50s policy, there is still at least one company in the market that makes you pay until you die – no matter how long you live.
Loaded premiums was also side-stepped as an issue – with the regulator looking at aggregate figures, which disguise the issues at a product level. If the tables were turned and the FCA was looking at a firm’s fair value assessment, they would rightly criticise them for looking at an aggregate level – as averages often disguise poor outcomes at the margins.
My broad assumption reading these papers was that the lack of follow through in these studies was driven by the political winds. It’s clear that the Treasury would take a dim view of any major market intervention right now – and if you’re the FCA, it’s reasonable to think “Is this the market we want to go into battle for?”. However, people inside the FCA have told me that some of the lack of analysis – particularly in the protection market study – is also down to a lack of resource.
Certainly at a high level, the FCA lost two of its most important people over the last year – Sheldon Mills, its executive director, and Matt Brewis, its head of insurance. And the combination of these market studies, plus home and travel insurance claims studies, the Which? super-complaint and motor finance must have left the regulator with too much to do and not enough people to do it.
It’s not an easy job being the regulator - I don’t envy them. And I’m sure the lack of resourcing has proved a real challenge. But it’s nevertheless disappointing to see these opportunities wasted. There remain real issues in the protection market and the premium finance markets. The biggest chances to get to grips with these have now been and gone – and it may now be another decade or more before these markets are subject to the same scrutiny again.