The Financial Services Regulatory Authority of Ontario (FSRA) recently uncovered troubling practices in the life insurance sector that are harming consumers. Some managing general agencies (MGAs) and their agents have been using inappropriate training materials and selling complex products that may not meet their customers’ needs.
In response, FSRA developed an informed, evidence-based and transparent plan that includes the following six initiatives.
- Enhanced sector supervision: Our assessments of agents at three MGAs and a review of their client files revealed that many agents lacked proper training and supervision, potentially leading to misleading sales of universal life insurance policies. Detailed findings are available in two reports: Life Agent Thematic Examinations: Tiered-Recruitment Model MGAs and Observed Practices in the Distribution and Sale of Universal Life Insurance.
- A new regulatory framework: FSRA continues to progress actions to strengthen the regulatory framework for MGAs and other intermediaries that distribute life insurance products. This includes, but is not limited to, developing a new proposed rule.
- Enhanced and targeted guidance: New guidance will clarify suitability requirements for life insurance agents, including MGAs, and how past and current conduct may affect their suitability to hold a licence. It will also clarify oversight responsibilities for insurance companies. FSRA will release the guidance for public consultation soon.
- Enforcement and regulatory actions: FSRA has taken enforcement action against two MGAs represented by over 11,000 agents (World Financial Group and Greatway Financial). We also took regulatory action against 50% of the 130 agents we reviewed, who failed to meet professional standards, were unqualified and/or misled consumers. FSRA will continue to follow up with MGAs, agents and insurers and take enforcement and regulatory actions when necessary.
- Whistleblower protection: Through its robust whistleblower program, FSRA will enable industry insiders to confidentially report misconduct and be protected from retaliation.
- Consumer education: FSRA will launch a campaign this fall to empower consumers by educating them to ask the right questions about their life agents and the products they are being offered. FSRA will continue to engage with industry members and seek collaboration to help educate consumers.
Consumers deserve better. The regulatory breaches and lapses in best practices among agents associated with these MGAs is unacceptable. We will continue to supervise this sector, including insurance companies, and take enforcement actions where appropriate to ensure consumers receive policies and products that are right for them and their families.
Huston Loke is the executive vice-president of market conduct with the Financial Services Regulatory Authority of Ontario.