Meeting Summary - March 5, 2021

L&H Insurance Technical Advisory Committee (TAC)
on Insurer Oversight of MGAs

Meeting summary

Date: March 5, 2021
Time: 1:30 – 3:00 PM ET

1. Opening remarks

FSRA staff discussed FSRA’s journey to look at distribution from end-to-end, which began with adoption of FTC principles. FSRA staff encouraged dialogue and questions on the observations presented.

2. FSRA distribution channel review: purpose and approach

FSRA staff spoke to the evolution of compliance expectations – from an approach focused on policies and procedures to one based on evidence of policies and procedures in action. In achieving its strategic priority to protect consumers, FSRA will focus on evidence that demonstrates effective compliance risk management tools and oversight programs.

FSRA staff noted that today’s material focuses on contractual agreements between insurers and MGAs, and supervision and monitoring practices. As well, today’s meeting is likely to be the last meeting where FSRA will be sharing observations from the insurance distribution review before moving on to next steps.

3. Sharing preliminary research

a) Module 3 – contractual agreements between insurers and MGAs: scope & observations

FSRA’s review looked at insurer-MGA agreements and how insurers and MGAs are executing against those contracts, particularly in relation to delegated tasks.

FSRA took a two-pronged approach to reviewing the delegated functions – observing the design of the delegation under the agreement, followed by assessing its practical implementation.

Screening

FSRA staff recapped some of the salient points about agent screening from the last meeting, including due diligence and second-level screening conducted by insurers.

Outside of this review, FSRA has seen some hybrid models closer to a national account structure where the insurer is not involved in the screening or contracting of agents at all.

Training

FSRA recognizes the complexity of agent training, particularly for independent agents who are contracted with multiple insurers – a situation that can make tracking training difficult.

FSRA found that all reviewed insurers contracting with MGAs viewed training as a shared responsibility between insurers and MGAs.

FSRA staff explained some of the noted practices among reviewed insurers for agent training, including insurer expectations and follow-up with MGAs.

b) Module 4 – supervision and monitoring: scope & observations

Monitoring

Generally, agreements between the reviewed insurers and MGAs appeared to be written in a spirit of shared responsibility. While some contracts were more prescriptive in expectations and requirements for MGAs, FSRA delved deeper on the actual execution using a three-pronged approach:

1) How reviewed insurers risk-assess their MGAs.

Most reviewed insurers used the compliance review survey (CRS), or CRS results in conjunction with the sales volume. However, due to noted shortcomings of CRS, the risk assessments were determined to be minimal and not a comprehensive tool to risk rank MGAs.

2) How reviewed insurers monitor MGAs for implementation of delegated functions, including monitoring agent practices.

All reviewed insurers had policies and procedures for conducting audits/reviews of their contracted MGAs, varying in depth and complexity from insurer to insurer. FSRA also saw various annual formal audit cycle schedules implemented by insurers.

Several TAC members noted that FSRA’s findings in this area appear to be consistent with their understanding and experience.

FSRA staff noted that reviewed insurers reported developing relationships with their MGAs such that they have been able to move beyond the policy and procedural stage to understanding implementation. This has led to efficiencies in selecting MGAs to audit, the audit cycle, and performing the audits themselves.  

3) How reviewed insurers directly evaluate independent agents.

All reviewed insurers conducted agent reviews but the level of risk assessment and scope between the insurers varied. FSRA saw a range of selection methodologies from weighted risk scoring to random selection.  

4. Discussion and questions

TAC members had clarification questions and discussed:

• impact of contract age
• breadth of MGA business models
• ways for evaluating MGA business outside of the CRS
• consumer risks unique to the MGA channel
• required audits/reviews and challenges for MGAs
• FSRA’s approach to collecting and selecting risk indicators to perform agent reviews

TAC members generally agreed that FSRA’s findings are not surprising and appear to reflect their experiences and what they are seeing in the industry.

FSRA staff noted that although there is no clear timeline yet, FSRA’s next steps in the policy development phase include continued connection with the TAC at key points during the process.

5. Review timelines and proposed TAC meetings

FSRA staff expressed appreciation for the candid comments and member validations of FSRA’s findings as presented, and thanked everyone for their contribution to the discussion and for identifying issues of which FSRA should be mindful in their work going forward.

FSRA staff encouraged members to provide additional feedback directly to FSRA TAC members.

Attendance record

Invited/Attended	Company Name	Attendance Status (A)ttended; (R)egrets; (S)ubstitute
Earleen Moulton	BFG Financial/CAILBA	A
Mari-Jayne Woodyatt	BFG Financial	A
David Sutton	The Edge Benefits	A
Mary Ingarao	SunLife	A
Kim Hayes	Manulife	A
David Stewart	Financial Horizons Group	A
Brent Mizzen	CLHIA	A
Todd Hynes	Ivari	A
Sean Sorensen	Walker Sorensen LLP	A
Paul Holba	Empire Life	A
Andrew Fitzpatrick	Canada Life	A
Leanne Winter	Equitable Life	A
Sheldon Stier	Stier Financial Advisors	A
Terri Botosan	Hub Financial Inc.	A
Huston Loke	FSRA	A
Erica Hiemstra	FSRA and TAC Chair	A
Swati Agrawal	FSRA	A
Rosemary Steffler	FSRA	A
Kevin Lim	FSRA	A
Thera Medcof	FSRA	A
Joel Gorlick	FSRA	R
Chris Caldarelli	FSRA	A
Laura McLellan	FSRA	A
Beth Elder	MoF	R
Kim Chaplick	MoF	A
Hannah Rose	FSRA	A
Nathan Aranha	FSRA	A
Sohail Deen	FSRA	A