Advisers and providers needed to do more to protect their clients against rising premiums and inadequate protection policies, the FCA has warned.
The UK watchdog highlighted how a well-functioning insurance sector is vital for the health of the financial services industry, and that this importance is demonstrated by high consumer demand, with more than four out of five UK adults having at least one insurance product.
"Increasing numbers of people are living with long-term illness. More than 15m people have a long-term condition, and this is projected to increase in the next 10 years," the Financial Conduct Authority (FCA) said in its 86-page Sector View 2020 paper.
Key findings from the report found that fair pricing continues to be a major problem in personal lines insurance, that access to and the availability of insurance for consumers with health conditions remains an issue and that technology developments are changing how consumers and insurers interact.
"The industry will need to ensure these individuals understand the importance of protection products, such as income protection, and to ensure that products are accessible and fairly priced."
From the consumer perspective, the FCA found that 90% of consumers say a loyalty penalty is unfair and that price dominates decision-making in home and motor with only 15% of motor and 14% of home customers choosing a provider based on the features of the policy.
The FCA introduced new requirements to help consumers with more serious pre-existing medical conditions (PEMCs) navigate the travel insurance market. The changes require firms to signpost certain consumers with PEMCs to a directory of specialist providers, which the Money and Pensions Service (MaPS) will develop alongside the FCA for summer 2020.
Firms offering retail travel insurance must implement the new requirements by 5 November 2020.