A steering group chaired by the Association of British Insurers (ABI) and the Treasury is currently drafting a report on under-protection.
The report will look at the new state model of welfare introduced by the Welfare Reform Act 2012 - which includes greater means testing and capping - and its relationship with private insurance.
The Welfare and Protection Steering Group has set itself the challenge of understanding the problem of under-protection: inadequate private and/or state support in times of unemployment from long term illness or disability.
Karen Evans, protection policy adviser at the ABI, said: "It is being drafted at the moment. It is about trying to understand the problem of under protection and who covers what. It is looking at the introduction of Universal Credit with means testing and capping and the impact on entitlement.
"It is very difficult to understand what benefits people have - even I find it difficult. It is a very complex area."
She added on the topic of income protection (IP) that while state benefits were a complicated feature to build products around, consumers needed the choice of cover that accommodated for benefits and cover that did not.
But Evans said consumers were just not thinking about protection and welfare as a whole "at all".
The report will outline how many and which types of individual and household are under-protected by the welfare state.
Evans presented to providers at a Protect event last Friday and said matters were further complicated by state benefits assessing income at a household level while insurers looked at an individual's.
She added in the presentation that first time buyers saving for an average deposit of £27,500 would also be impacted, given savings over £16,000 made them ineligible for means-tested benefits.
The steering group's calculations suggest that 17m employed individuals would experience a significant reduction in income were they to rely solely on those benefits provided by the state.
