Smaller mutual societies could disappear due to the increasing burden of regulatory costs, Exeter Family Friendly has warned.
The insurer cautioned that the current trend of consolidation could be transferred into distributors if these costs continued to rise.
However, LifeSearch highlighted that there was a good side to the spate of mergers and acquisitions in the protection market.
Speaking at the COVER Health and Protection Forum, Andy Chapman, CEO of Exeter Family Friendly, said financial requirements and red tape were restricting the market.
"Apart from two or three very large ones I don't think there's enough capital in mutuals to go mass market and be all things to all people," he said.
"What we can do very successfully is be specialised product providers and so there is huge potential for medium sized mutuals like ourselves.
"But there is some risk of the very small mutuals going out of existence purely because of regulation.
"Not because they don't do good things, but the cost of regulation comes at a minimum price and I think they will find that more and more difficult to get over," he added.
Chapman continued by saying he would prefer to be able to increase prices naturally for product development but the current regime meant rises were unavoidable and could initiate more consolidation.
"If our costs go up because of regulation that is horrendous," he said.
"If I could put premiums up to enable more people to be underwritten at ordinary rates and get more customers on our books that's great, but if you start seeing costs go up because of regulation, and we are - big time, that's just got to be bad and its going to impact on consolidation in the marketplace, both in providers and distributors."
Fears around the reduced number of providers in the marketplace were highlighted by Alan Lakey, principal of Highclere Financial Services, and Tom Baigrie, CEO of LifeSearch.
However Baigrie suggested that having much larger players actively involved was an improvement.
"The offsetting factor in the protection space is there are now three or four giant businesses engaged, with a few specialists around the edge," he said.
"One of the benefits we're seeing is those giants are now looking at this sector as vital.
"For years trying to get to the board of Legal & General or Aviva was kind of impossible - we had become a sideline of a sideline - but that's not true anymore with the big players as protection has become centre focus.
"So this is really good that the big players are focusing very hard on what we do because then things will move for the better that's one up side.
"But if it carries on any further or other players leave the market like Royal Liver were forced to do, then that's an extremely bad thing," he concluded.
