FSRA takes action to ensure those in the Life and Health Insurance Sector treat consumers fairly

The new activities follow a joint review of Managing General Agencies

The Financial Services Regulatory Authority of Ontario (FSRA) is strengthening its supervisory activities for Managing General Agencies (MGAs) and licensed agents in the life and health insurance sector.

FSRA today announced that, based upon a review of three life and health MGAs, it will take the following actions:

  • conduct a thematic review of life insurance agents licensed in Ontario and contracted with the three reviewed MGAs, which is expected to be completed by end of 2022
  • develop an expanded supervisory plan and initiate a review of selected insurers contracted with these reviewed MGAs in the fall of 2022
  • release draft interpretation Guidance for public consultation in the fall of 2022
  • draft a proposed Rule to enhance the MGA regulatory framework, planned for public consultation in 2023
  • consider appropriate regulatory action

These actions are in response to a joint cooperative review of three life and health MGAs. The review was led by FSRA for the Canadian Council of Insurance Regulators (CCIR) and was the first review of its kind to identify potential market conduct and consumer risks.

The review found that these three MGAs, which followed a tiered-recruitment business model (may also be referred to as a multi-level-marketing, network-marketing, recruitment-focused, or tiered-level model) that does not appear to be a standard practice in life and health MGAs, lacked mechanisms to ensure consumers are treated fairly. The review also considered the involvement of insurers and potential practices of their contracted agents.

The review identified four main areas of concern among the three MGAs reviewed:

  • Agents were compensated based not only on their own insurance sales, but also on insurance sales made by the people they recruit. This could have motivated the recruitment of individuals who are not yet licensed and resulted in sales by many newly licensed agents
  • training of agents lacked important substance, rigour, and reporting mechanisms to ensure they understood and were able to serve customer needs
  • relatively complex products were sold by agents without adequate oversight to ensure product suitability and fair treatment of customers
  • insurers and MGAs performed minimal formal and proactive supervision of their agents to ensure fair treatment of customers

“The observations of the review, combined with the rapid growth of these MGAs and newly sponsored agents in Ontario, point to the potential for consumers to be harmed,” said Huston Loke, Executive Vice President, Market Conduct at FSRA. “FSRA will continue to protect consumers and ensure they receive suitable product recommendations from their life insurance agents.”

Treating customers fairly

Consumers should receive information from their life insurance agent that sufficiently explains the characteristics of the product they are buying and how it meets their needs. For more on what to expect when working with a life and health insurance agent or company, visit: Working with a life & health insurance agent or company.

Consumers who believe their insurance agent acted unethically may file a complaint following the steps outlined on FSRA’s website. Unethical agent behaviour may include not disclosing conflicts of interest or providing false or misleading information about a product.

About FSRA and Insurance

FSRA supervises insurers, intermediaries, and agents that sell life and health insurance by ensuring they comply with Ontario’s laws. This includes meeting the qualifications and requirements for a licence.

Life and health insurance MGAs are intermediaries. More individual life and health insurance policies are sold through agents associated with MGAs than through any other distribution channels in Ontario.

Insurers are legally required to have systems reasonably designed to ensure compliance by their agents. This applies to the MGAs and individual agents who sell their products.

Insurers, MGAs, or agents who delegate a duty, such as agent screening, training, or supervision, retain responsibility for their legal obligations if their delegate does not adequately perform the duty assigned.

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FSRA continues to work on behalf of all stakeholders, including consumers, to ensure financial safety, fairness, and choice for everyone. 

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