Compliance Matters: Week ending 6th February 2026

Here is a digest of regulatory issues that have come across my desk this week.  Where relevant, I have provided high-level summaries and hyperlinks to documents that give further detail.

• A gap in pure protection

• Relevant Live Cover

• Three talking points about life and legacy

• HM Treasury makes Crypto Regulations

A gap in pure protection

A survey indicates that 58% of adults do not hold a pure protection product.  The FCA has urged the insurance sector to do more to help consumers access products that can support them and their families in the event of serious illness or death.  As financial advisers we can be part of the solution to closing the gap where suitable and affordable for our clients.

The FCA has published an interim report in its market study on the distribution of pure protection products to retail customers.  The report notes that the pure protection market works well in many respects, including by offering a wide range of products, boasting high claims acceptance rates and ratios, maintaining stable new business premiums, and using technology efficiently.  On average, loaded premiums or restricted panels were not found to be currently creating worse pricing outcomes for consumers.

However, there were a number of areas which the FCA felt could operate more effectively:

• The protection gap: there are many consumers who would likely benefit from pure protection products but do not currently use them.  The FCA suggests that this may be because consumers are not aware of their needs, are unable or unwilling to pay for such products, or have misconceptions about them.

• Income protection claims ratios are lower than other pure protection products: the FCA plans to refresh its assessment in this area ahead of the final report using 2025 premium and cost data from a sample of insurers.

• Incentives to switch consumers: the FCA wants the sector to collect, monitor and report better information on customers switching providers to ensure the switch aligned with their needs and not simply to generate new commission for the intermediary.

• Claims experience: the FCA understands that intermediaries can encourage certain practical steps at the point of sale (such as placing policies in trust, setting up wills or powers of attorney).  The regulator wants to encourage more of this, to improve consumers’ experience if and when they need to claim.

The FCA is inviting feedback on its interim findings until 31 March 2026.  Its final report, including conclusions and an update on progress, is due to be published in Q3 2026.

Graeme Reynolds, Director of Competition and Interim Director of Insurance at the FCA, commented: “These insurance products play a vital role in helping families manage some of the most difficult experiences in life.  While competition in the market is mostly working well for consumers, many more people could benefit from protection.  We will work with industry to reduce this gap, to help consumers navigate their financial lives.”

Relevant Life Cover

When discussing financial planning with owner/managers of businesses, we discuss pensions, particularly in the run up to the end of the tax year.  We may also discuss ISAs and VCTs where our client has maximised their pension contributions.  We forget the most important element to the creation of the wealth, the owners of the business themselves.

Relevant Life Cover is a tax-efficient, employer-funded life insurance policy designed for individuals, such as Directors or Senior Managers, paying a lump sum to beneficiaries if the insured dies or is diagnosed with a terminal illness while employed.  It acts as a "death-in-service" benefit, often for smaller businesses not qualifying for group schemes.  Whereas Key Person Insurance is geared towards mitigating losses for a business, Relevant Life Cover protects against the death of an employee from relatives' perspective by providing a tax-free cash lump sum to their family if they do pass away.

There are key benefits to relevant life cover over personal protection:

• Tax Efficiency: premiums are paid by the business and treated as an allowable business expense, reducing corporation tax.  They do not usually trigger P11D benefits-in-kind charges.

• Payout: benefits are paid as a tax-free lump sum to the employee's family or dependants, typically via a trust.

• Suitability: relevant life cover is not available for sole traders or equity partners in partnerships, it is ideal for owner/managers of small businesses, contractors.

Why Choose Relevant Life Cover?  It provides high-value protection for owner/managers and senior employees, helping companies attract and retain talent.  It serves as an alternative to registered group life schemes, allowing tailored, individual coverage that does not count towards a person's lifetime pension allowance.

Three talking points for client conversations about life and legacy

In an article in Professional Adviser Nick Bird, Regional Director, Triple Point discusses the benefits of Business Relief when it comes to estate planning.  I have deliberately not copied and pasted the article; it is not that long and clicking on the link will take you straight there.

HM Treasury makes Crypto Regulations

Crypto is the new hot topic for regulation.  HM Treasury has made the Regulations that will introduce several new designated and regulated activities relating to crypto assets. In the main, the Regulations take effect on 25^th October 2027 but take effect in part at the end of this month to enable the FCA to make appropriate rules and guidance and to enable the permission and approval process to start.  Among other things, the Regulations:

• set out new designated activities for public offers of qualifying crypto assets and admissions to trading on a qualifying crypto asset trading platform and enable the FCA to make rules relating to those activities;

• set out the crypto asset market abuse regime and give the FCA appropriate rulemaking powers;

• amend the Regulated Activities Order (RAO) to include new definitions and new regulated activities and exclusions from them:

  • issuing qualifying stablecoins;

  • safeguarding of qualifying crypto assets and specified investment crypto assets;

  • operating a qualifying crypto asset trading platform;

  • dealing in qualifying crypto assets as principal;

  • dealing in qualifying crypto assets as agent;

  • arranging deals in qualifying crypto assets; and

  • qualifying crypto asset staking

• amend FSMA to bring crypto assets within scope of existing definitions and requirements;

• amend the Financial Promotion Order (FPO) in line with RAO changes;

• make consequential change to other financial market statutory instruments and the Money Laundering Regulations; and

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  set out how the transition will be managed.

Watch this space for further developments in this area.