Queen's Park, Ontario legislature, exterior

Ontario’s financial services regulator plans to force a managing general agent to submit detailed information every three months on its 10,000-plus affiliated agents, over concerns that agents lacking direct monitoring are selling complex products.

Toronto-based World Financial Group Insurance Agency of Canada Inc. (WFG) has 15 days to request a hearing over proposed new conditions on its corporate agent licence, the Financial Services Regulatory Authority of Ontario (FSRA) said in an enforcement notice dated April 3. WFG gets a large proportion of its revenue from permanent life insurance, without directly monitoring agents and with no formal proactive agent reviews, the enforcement notice alleged.

Investment Executive requested comment from WFG but did not hear back before press time.

The proposed conditions include reporting — initially within 30 days — the names and licence numbers of WFG’s individual agents, including those under agreements involving supervision, the notice said.

It said that WFG’s training and supervision framework “is largely based on delegation to upline agents.” Further, it said that WFG, when asked in a review, stated it does not perform direct monitoring and supervision of agents, nor does it have specific individuals or departments formally overseeing the entire licensed agent monitoring function.

WFG was one of three Ontario MGAs named in a joint review released in 2022 in which FSRA and the Canadian Council of Insurance Regulators alleged the firms actively encourage agents to recruit new individuals, and pay agents not only for their own sales but also for those of new people they recruit — resulting in MGAs paying several layers of agents for one insurance sale. This type of multi-level marketing “does not appear to be a standard practice” with life and health MGAs, FSRA said at the time.

In its enforcement notice on April 3, FSRA said WFG operates on a tiered-recruitment-based model with ten levels, from training associate up to executive chairman, including contracted licensed agents recruiting individuals into the MGA.

In April 2022, 10,586 individual Ontario insurance agents were affiliated with WFG, of whom more than two-thirds (7,201) were licensed with FSRA for less than three years, the notice said. About 93% of WFG’s 2021 total gross income in Canada was from life and health insurance — about half of which was generated from universal life products.

“FSRA alleges that gaps in WFG’s operation and ongoing proceedings by another regulator against WFG may raise reasonable grounds about WFG’s suitability to be licensed,” FSRA said in a release, referring to a separate Autorité des marchés financiers proceeding.