The protection gap: whose responsibility is it to close it?

Last week, we looked at how independent contractors are under-covered for income protection. In that article, we examined LifeSearch and HomeOwners Alliance’s recent research into the ‘protection gap’. More importantly, we highlighted why the current misconceptions around income protection are even more consequential for people working outside traditional employment.

This week, we want to widen the lens.

Why? Because the under-insurance problem isn’t just a contractor issue. It’s a systemic one. And the question of who is responsible for fixing it is one the market is wrestling with right now. Are the FCA, the industry, or the brokers sitting across the table from clients responsible?

As one such broker, we thought it worth investigating. Here’s what we’ve found:

The protection gap: not a niche problem

Almost half of UK mortgage holders would struggle to meet their payments within six months of losing their income. Yet eight in ten have no income protection in place. That’s not a niche problem. It’s a structural failure that leaves millions of households exposed to shocks they’re wholly unequipped to absorb.

More than a third of mortgage holders have no life insurance, income protection, or critical illness cover at all. The striking thing, as industry commentary has noted, isn’t the scale of this under-insurance. It’s why it persists that’s been confounding the experts. Despite decades of awareness campaigns, regulatory attention, and broker conversations, many homeowners just don’t buy it.

The FCA’s own interim review found that 58% of adults lack pure protection cover. And that’s despite the market generally working well for those who buy it.

That last clause is super important. The products exist. The claims get paid. The pricing is broadly stable. The market isn’t broken for the people inside it. It’s the awareness of what income protection does failing to reach the outside majority that’s the problem.

The FCA’s role: convener, not fixer

The FCA has called on the insurance industry to help close the protection gap. A final report, due in Q3 2026, will set out its findings and provide an update on progress.

Whether that report will contain anything more than encouragement remains to be seen. The signals from the interim findings suggest the FCA doesn’t see heavy-handed intervention as the answer. And there’s a reasonable argument that they’re right in that belief.

Justin Harper, Chief Marketing Officer at LifeSearch, has written compellingly about the protection gap. He believes the FCA has an important role to play as a convening force. Namely, they should coordinate action across government departments, employers, housing, education and financial services to embed practical life-moment prompts consistently and at scale. But he’s clear that closing the protection gap cannot be left to advisers or insurers alone.

That’s a nuanced and accurate reading. The FCA can set the tone, create frameworks, and signal expectations. What it can’t do is meet clients and ask what would happen if they couldn’t work tomorrow.

Why the mortgage moment still matters (but isn’t enough in isolation)

Historically, the mortgage has been the dominant trigger for protection conversations. Those moments account for around 80% of protection sales. But that’s no longer sufficient on its own.

People are now buying their first homes later than in previous generations, typically in their mid-thirties. Additionally, around five million households are privately renting, both on short- and long-term leases. Many of these tenants won’t have a mortgage for years, if at all.

Overlay that with modern working lives. People are likely to have a dozen or more jobs over their lifetime. Increasingly, people work multiple or parallel careers, have more volatile income, and have less linear employment. As such, traditional triggers for financial resilience conversations get delayed or missed altogether.

For contractors, this compounds an already acute vulnerability. The mortgage moment does exist, and matters enormously. But, with the recent dynamic housing market, many contractors are remortgaging every two years. Professionally, they change contracts every six months or so. And, increasingly, they’re utilising different payment structures. They’re living in a financial environment that no single product conversation can fully address.

The language problem: where the conversation goes awry

There’s a theme that emerges clearly from the industry debate. It’s the way many advisers discuss protection that’s the barrier. In conversations with customers, product policy names rarely crop up. Instead, people talk about paying rent, covering bills, or what would happen if they couldn’t work for a few months. That’s what concerns them.

We have to realise that ‘protection’ is familiar inside the industry. But, for many people, it means very little, or many different things at once.
Customers are far more likely to engage with protection when:

• Brokers or advisers explain it in clear, everyday language
• Rewards are grounded in real-world outcomes, rather than policy jargon

Mortgage brokers already do this instinctively when discussing affordability, mortgage term and risk. But protection insurance is still too often framed as an apologetic technical add-on.

As such, many customers don’t even understand the basics of the real risks they face, nor what protection does. Products, definitions, waivers, deferred periods, premiums, T&Cs. That framing needs to change. And brokers are better placed than anyone to change it.

Why brokers are central to the solution

Mortgage brokers are uniquely placed to reverse the lack of clarity. Not through “more selling”, but by changing when and how protection enters the conversation.

Mortgages are often the largest financial commitment people ever make. It’s also the moment when vulnerability becomes most obvious.

“What happens if your income stops?”

That single question, asked at the right moment, does more to open a real conversation than any product brochure. And it’s important not to address income protection as a bolt-on product, too. When advisers position protection as part of the home-ownership story, engagement changes.

It’s the mortgage broker who sits with their client, either in person or online. It’s the broker holding their full attention before a mortgage offer is issued. No client should leave that conversation confused. They should understand how a policy would protect their home if life goes awry.

That conversation’s not a counsel of perfection. It’s a basic professional standard. And for brokers who specialise in contractor mortgages, it’s especially important. Contractors’ income structures are already non-standard. The stakes of any earnings disruption could be, therefore, much more damning.

Who do people trust?

Prompts to take out income protection come across very differently, depending on who delivers them. When messages come from trusted, everyday touchpoints, they feel supportive and normal, rather than a sales pitch.

Trust is (usually) implicit from employers, government-backed services, regulators, or the digital money apps people already use to manage their finances. But when it’s someone not recognised as an authority? That’s when people tend to be reticent about taking out a policy.

Providing this support is why Freelancer Financials covers protection so fully. We want our clients to trust that we know what protection is relevant to their situation. The more informed, engaged, and trusting clients are, the greater the likelihood that the protection gap will close.

Our actions speak louder than words, too. We navigate contractors through complex mortgage applications all the time. We deliver results that a high-street adviser can’t.

How? We understand contractors’ income structures. And in the mortgage application process, we’ve advocated on their behalf with specialist lenders. The result carries a level of trust that a cold conversation about income protection could never replicate.

That trust is then the foundation for our next conversation. And that next conversation, for any contractor-homeowner without income protection, needs to happen. Now.

What building trust means for our clients

At Freelancer Financials, this is not a theoretical debate. If income stopped, nearly half of mortgage holders wouldn’t turn to their insurance. Instead, they’d rely on:

• Cutting back on spending
• Payment holidays
• Family support

Many have no clear plan at all. This ignorance isn’t wilful avoidance; it’s misunderstanding.

Our contractor clients work hard to build income structures that work for them. They take the business of limiting liability, retaining profit, and managing tax seriously. Many of them apply the same rigour to their mortgage applications. But income protection—which protects the ability to pay the mortgage they’ve worked to secure—often goes unconsidered.

We aim to change that, one conversation at a time. Not because we’re required to raise it. But because any adviser who understands what contractors stand to lose if they can’t work would raise it as a matter of due diligence.

If that conversation is one you haven’t had yet, now’s the time to have it.

A note on compliance:

Discussions about income protection products should be conducted in accordance with your regulatory permissions. At Freelancer Financials, we have a dedicated specialist protection team. They ensure our clients receive appropriate, regulated advice on income protection that reflects their lifestyles as independent professionals.