But the FCA is concerned that certain commission practices may be misaligned with consumer interests. For example, advisers might be tempted to“ churn” policies- encouraging clients to switch insurers unnecessarily to earn fresh commission, or insurers might embed high commission costs into premiums, reducing value for policyholders.
Fair value: More than just price One of the most encouraging aspects of the FCA’ s approach is its emphasis on fair value- not just in terms of cost, but in the broader context of product quality, suitability, and service. Advisers know that the cheapest policy isn’ t always the best. A slightly higher premium can offer significantly better coverage, and the FCA’ s recognition of this nuance has been widely praised.
Ian McKenna of Protection Guru noted that the FCA’ s decision to examine value alongside Consumer Duty obligations is a sign that the regulator understands the complexities of protection advice. This is a welcome shift from past regulatory efforts that focused narrowly on price or sales volumes.
Major insurers, too, see opportunity in this approach. Jamie Jenkins of Royal London described the study as a chance to assess the market and its products, emphasising the importance of enabling consumers to access cover from providers they trust. The hope is that the study will lead to a more competitive and innovative market- one where firms compete on genuine value rather than marketing gimmicks or commission deals.
Commission: Reform without retrenchment
Perhaps the most contentious issue in the study is commission. It’ s no secret that commission payments are central to the economics of protection advice. They make it possible for advisers to offer services without charging clients directly, thereby ensuring broad access to professional guidance.
The industry’ s response has been nuanced. While defending the necessity of commissions, advisers and brokers have acknowledged that the structure of these payments deserves scrutiny. The Protection Distributors Group( PDG) has explicitly supported the FCA’ s efforts to investigate premium loading and volume-based commission overrides.
There’ s also a debate around indemnity versus trail commission. Some fear that a shift to drip-fed payments could make protection advice uneconomical, especially for small cases. Alan Lakey of CIExpert warned that banning indemnity commission could have“ severe repercussions,” potentially widening the protection gap by driving advisers out of the market.
The message to the FCA is clear: reform is welcome, but it must be thoughtful. Commissions, done right, are what enable millions to get insurance advice. The goal should be to eliminate abuses without undermining access.
Avoiding unintended consequences Hand-in-hand with the commission debate is a broader concern about unintended consequences.
After all, any detriment to the protection market would be not only a loss not just for advisers, but for consumers. Without professional guidance, many would turn to price comparison websites or direct-to-consumer channels, where they risk buying unsuitable cover. As Michelle Lawson, an independent financial adviser, put it:“ Good brokers know how to advise, not just sell, protection”.
There’ s also the risk of insurers withdrawing from the market if margins are squeezed too tightly. Fewer providers means less competition, which could lead to higher prices and reduced innovation. The FCA has acknowledged this risk and expanded the study’ s scope to understand why some firms have exited the market.
THE MESSAGE TO THE FCA IS CLEAR: REFORM IS WELCOME, BUT IT MUST BE THOUGHTFUL.
| PROTECTION ADVISER | AUTUMN 2025 | 7