The Financial Services Regulatory Authority of Ontario (FSRA) has fined a former insurance agent $80,000 for selling life insurance without a licence. The regulator also fined an insurer and managing general agency (MGA) a combined $115,000 for paying commissions on the unlicensed sales.
FSRA fined Gurpreet Singh Ghuman for acting as a life insurance agent after his licence lapsed. The regulator issued the order in October after Ghuman withdrew his request for a hearing, a release on Thursday said.
Ghuman’s licence expired in fall 2021, says a notice of proposal dated April 9, 2024. The former insurance agent subsequently continued for several months to act as an insurance agent and advisor for Industrial Alliance Insurance and Financial Services Inc. (iA), arranging 58 life insurance policies for clients, the notice says. Ghuman had contracted with World Financial Group Insurance Agency of Canada Inc. (WFG), an MGA, since 2013.
Ghuman told FSRA he “inadvertently” failed to renew his licence, the notice says, and he also denied receiving FSRA’s 2021 reminder email about renewal.
“Ghuman’s actions displayed a reckless disregard for his responsibilities as a life insurance agent,” the notice states in outlining the grounds for the penalty. The former insurance agent was “solely responsible for filing licence renewal applications in a timely manner.”
According to statements in the notice, Ghuman’s licence code remained active in iA’s systems despite the lapse because of inaccurate licensing information in WFG’s systems.
IA paid more than $257,000 to Ghuman, though WFG, as first-year commissions on the unlicensed sales, the notice says, and WFG received or was entitled to receive from iA more than $556,00 as overrides on the unlicensed sales. The commissions and override amounts were reversed, except for about $2,000, according to statements described in the notice.
WFG paid Ghuman more than $455,000 as commissions and bonuses on the unlicensed sales, which was returned to iA, according to statements described in the notice. WFG is attempting to collect the amount from Ghuman, the notice says. As of March 27, 2024, Ghuman owed more than $406,000 to WFG on account of chargebacks, it says.
FSRA fined iA and WFG $65,000 and $50,000, respectively, for paying compensation for unlicensed sales. The regulator also fined iA $50,000 for system failures.
“Industrial Alliance and WFG exhibited negligent conduct by failing to take any steps to ascertain Ghuman’s licence status during the relevant time,” the notice states in outlining the grounds for the penalties.
It further states that “unlicensed insurance agent activities” and the “negligent facilitation of such activities had the potential to cause significant harm to clients and has harmed the public interest.”
Regarding remedial actions, WFG returned to iA the commissions and bonuses on the unlicensed sales and undertook staff retraining, the notice says. Also, the MGA and insurer indicated that licensed insurance agents were assigned to each of Ghuman’s iA clients after he was terminated.
None of the 58 iA life insurance policies placed through the unlicensed sales were cancelled because of Ghuman’s unlicensed status, the notice says. “Industrial Alliance was and/or is entitled to premiums on those life insurance policies,” it states.
FSRA is consulting until Nov. 19 on an updated proposal for licensing MGAs in Ontario’s life and health insurance sector. The rule imposes new requirements for MGAs, but doesn’t remove or diminish insurance companies’ responsibility for agent monitoring and compliance.
The proposal was originally developed after regulatory reviews found instances of poor training and supervision of life agents, as well as clients being sold universal life insurance policies they didn’t need.