Although several executives at both managing general agencies and insurers have spoken out against regulations for MGAs, not much has been heard from those on the front lines — the insurance advisors. But, as the results to a supplementary question in this year’s Insurance Advisors’ Report Card reveal, almost two-thirds of independent advisors are in favour of MGA regulation.
In fact, they believe it will increase clients’ trust in their business channel and ultimately lead to growth in their own businesses.
This past February, the Canadian Council of Insurance Regulators released its review of MGAs in an issues paper entitled Managing General Agencies Life Insurance Distribution Model that looked at the evolving role and responsibilities of MGAs, which have gone unregulated since their inception in the 1980s. The paper also examined the supervisory issues concerning independent agents who work with multiple MGAs to process business and the channel’s ability to prevent and report misconduct.
The channel players that responded to the CCIR paper — the bulk of which were insurers and MGAs — stated that MGAs do not need more regulation in the areas of supervision and misconduct. They say MGAs already have processes in place to ensure the transactions that are processed are in consumers’ best interests.
However, these respondents did support regulators instituting more licensing requirements to determine which entities are true MGAs. Currently, there is no level playing field when it comes to which entities are considered bona fide MGAs. (For example, some MGAs act as pure administrators for contracts, whereas others also serve as full-service marketing arms for manufacturers — and the latter will handle everything from product education to complaint-handling.)
Many insurance advisors who ply their trade with MGAs feel differently. In fact, 64% of those surveyed in the Report Card said they support MGA regulation and felt that it was in clients’ best interests.
(The remaining 36% have an “If it ain’t broke, don’t fix it” mentality toward regulation and feel that the channel does a fine job of supervising itself.)
Among the advisors who support MGA regulation, many felt that enhanced rules would not only give MGAs more uniformity across the industry, it also would prevent advisor fraud that can arise when an advisor works with multiple MGAs. This, supporters said, would improve consumer trust in the channel.
As an advisor in Alberta with Toronto-based MGA PPI Advisory puts it: “[More regulation] is beneficial for everyone — agents, clients and the group. I can tell clients I’m being checked. There are some advisors who put us at risk, so it’s good to have a watchdog there.”
Still, many advisors who support MGA regulation said it should be done in the form of a self-regulatory organization. Says an advisor in Ontario with Winnipeg-based MGA Daystar Financial Group Inc. : “If the industry doesn’t [regulate itself], the government will — and I would rather be regulated by my peers than by bureaucrats who don’t have anything better to do than make my life difficult.”
However, as much as advisors want regulators to create an SRO, many stated that they hope it will not follow in the footsteps of the Toronto-based Mutual Fund Dealers Association of Canada. Advisors feel that the MFDA oversteps its mandate as a watchdog and hinders the mutual fund industry by creating too many rules.
“I think MGAs should live by a code of conduct,” says an advisor in Alberta with Woodbridge, Ont.-based MGA Hub Financial Inc. “But I’ve seen what the MFDA has done to the mutual fund industry, and it hurts clients more than anything.”
Yet, there has to be a balance between an SRO being a watchdog and a burden, says an advisor in Alberta with Daystar: “There has to be some regulation, but overregulation could ruin it for everybody.”
For the 36% of advisors surveyed who don’t think MGAs should be regulated, many feel the channel is already acting in an ethical manner and that MGA regulation would only lead to higher costs for clients.
As a Hub advisor in Ontario says: “[Regulation] slows the whole process down and consumers won’t benefit from it. Nor will advisors and the MGAs — because it will cut into profits.”
Instead, regulators should be instituting more rules and standards around brokers, say some advisors, as agents are at the heart of client advice.
“Instead of MGAs, I think more advisors should be more regulated,” says an advisor in Ontario with Mississauga, Ont.-based MGA IDC Worldsource Insurance Network Inc. “[Government bodies] don’t have to worry about regulation if they make it harder for people to get into the business to begin with.” IE