The Target Market Discipline
Products & Services
Every insurance product has a target market statement. The FCA reviewed them across general insurance in 2024 and found very few that met expectations. The statements existed; they just did not work as operational tools.
The structural move is to treat the target market not as a definition but as a feedback loop — a living system where actual sales data, outcome data, and complaint data continuously test and refine the definition. The loop has three components:
Definition that excludes, not just includesA useful target market statement defines three populations: the intended market, the adjacent market (people who might buy but were not designed for), and the excluded market (people for whom the product will produce poor outcomes). The excluded and adjacent definitions are where the operational value lies — they are what distribution needs to make decisions
Distribution controls with teethThe definition must travel into the distribution chain as a constraint, not a suggestion. This means co-manufacturing agreements that allocate responsibility, monitoring that checks actual sales against intended market, and consequences when they diverge
Outcome feedbackClaims patterns, complaint themes, and cancellation rates feed back into the definition on a regular cycle. A high claims decline rate is a target market signal. A pattern of complaints about coverage misunderstanding is a target market signal. The discipline is in treating these as structural feedback, not individual customer failures
Target market statements define excluded and adjacent populations with enough specificity that distribution can act on them
Actual purchaser profiles are monitored against intended market, with documented investigation where they diverge
Claims decline patterns and complaint themes are routinely analysed as target market feedback
Co-manufacturing agreements include target market monitoring obligations and consequences for divergence
A pet insurer discovered that 22% of claims declines came from customers who had bought the product for pre-existing conditions it explicitly excluded. The target market statement said “pet owners seeking comprehensive cover” — technically correct, operationally useless. Redefining the excluded market as “owners of pets with diagnosed conditions requiring ongoing treatment” and embedding that exclusion in the quote journey reduced misaligned sales by two-thirds within a quarter.
A commercial liability insurer found that a particular broker was placing 40% of its business outside the product’s intended trade categories. The co-manufacturing agreement had no monitoring clause. Adding quarterly portfolio reviews against the target market definition — with a contractual right to suspend delegated authority on divergence — changed the broker’s behaviour before any customer was harmed.
- Common failure modes
The most common failure mode is a target market statement too generic to be operationally useful — “adults aged 25-65 who own a car” tells distribution nothing about who the product is not for. A second is building the discipline for direct channels and neglecting intermediated channels, where the firm has less visibility but the same accountability. A third is treating the definition as fixed: markets shift, customer circumstances change, and a definition that was accurate at launch can silently become wrong.