Managing General Agencies (MGAs) are now the dominant channel for life and health (L&H) policy distribution, with close to two-thirds of total new premium for individual policies distributed through intermediary channels, according to the Financial Services Regulatory Authority of Ontario (FSRA).
But there’s been a relative lack of oversight for L&H MGAs for several decades as they’ve become a growing part of the distribution chain, in between the insurance carriers/firms writing the insurance policies and the agents who hold the direct relationship with the customer, said Rick Da Costa, a partner and national leader, corporate and regulatory insurance & reinsurance at law firm BLG.
“[In] this three-part sort of distribution chain, you had one major part in the middle that was really left unchecked,” he explained. Now, the regulators are playing a bit of “catch up.”
Saskatchewan introduced MGA licensing in 2020, New Brunswick in 2023, and after FSRA took part in or led four supervisory reviews related to L&H MGAs over the past four years, Ontario is set to follow on June 1, 2026.
FSRA’s reviews uncovered “troubling practices in the life and health insurance sector which are harming consumers,” including agents that are not properly trained and supervised, and customers being sold policies they don’t need, the regulator said. It also flagged recent enforcement actions against Greatway Financial Inc. and World Financial Group Insurance Agency of Canada Inc.
In 2023, it released a six-part plan to address those practices. That was followed in January by its proposed Rule 2025-001. The rule builds on amendments passed last fall to Ontario’sInsurance Actcreating a separate licensing class for L&H MGAs in the province. It establishes licensing, compliance and agent oversight requirements for businesses performing certain L&H MGA activities and aims to clearly spell out the roles and responsibilities of MGAs and insurers.
“The proposed rule aims to better protect consumers and strengthen oversight of L&H MGAs. It would also help ensure consumers are treated fairly and that they receive advice from well-trained and properly supervised agents,” FSRA said in response to emailed questions.
FSRA said it was still reviewing comments it received as part of a consultation that ended April 30, and was working to develop the rule to “support a June 1, 2026 launch date for the framework, as laid out in the [Ontario government’s 2025] budget.”
Overall, the reform has been generally well received by the industry, said Eric Wachtel, chief compliance officer at IDC Worldsource Insurance Network. “It’s a logical progression as we seek to improve outcomes for consumers, make sure nothing’s falling through the cracks,” he said.
“[FSRA] has been very measured and fact-based in their research,” Wachtel added. “For MGAs, it’ll be a big step — perhaps a bigger step for some more than others, depending on how advanced and evolved they are in their compliance regimes.”
Da Costa, whose clients include insurance carriers, MGAs, other intermediaries and agents across the country also lauded the reform.
“[Ontario has] come up with a very comprehensive legislative scheme that imposes pretty reasonable compliance requirements, on now, all stakeholders, all actors in the distribution chain.”
What does the rule say?
The rule introduces a licensing regime for MGAs, with renewals required at least every three years. To qualify, MGAs need to have compliance programs in place to monitor agents and sub-MGAs, and to have a designated compliance officer.
Da Costa describes the way agents are currently trained and monitored as a “patchwork of sorts.”
“It really depends on the MGA, it depends on the insurer,” he said.
Without a requirement to have compliance systems in place, some MGAs currently rely on insurers’ systems.
Da Costa says the new requirements for MGA compliance systems will put in place a “daisy chain effect.”
“All players in the distribution chain have to evolve or enhance their existing compliance strategies and systems to comply with their new obligations,” he said. The agents, MGAs, and insurers “almost have to plug in together. So, there’s this sort of symbiotic requirement to have to get together and make sure that they’re all working together so that they all can comply with their obligations.”
For IDC Worldsource, Wachtel said the rule wouldn’t require a big change from what the MGA is already doing, but that’s not the case for all MGAs.
“I think this is more of a formalization, and having the regulator centre stage there overseeing this, of what MGAs are accountable for, and what insurers are accountable for,” he said.
“In the past this was basically dictated by the MGA agreements that we have with insurance carriers. A large MGA can have more than 20 insurers’ products on their shelf for their independent advisors to distribute. So, you can imagine if each insurer has its own MGA agreement with different requirements, different obligations, then it’s kind of disorganized and it’d be far better to have a set standard.”
Some MGAs currently only have verbal agreements with some agents they’ve been dealing with for decades, Da Costa says. They’ll have to reach out and ask them to sign contracts.
Under the new rule, MGAs are also required to “assess” the compliance of each sub-MGA they contract with once a year.
In comments during the consultation period on the rule, which ended April 30, many MGAs, including Financial Horizons (FH), said the requirement would be too burdensome. It explained that it has MGA contracts with 30 insurers and Associate General Agent (AGA) agreements with dozens of AGAs.
“Currently, insurers audit FH once every 1-3 years (depending on the insurer), and FH audits its AGAs approximately once every 3-5 years (more frequently if there’s an elevated risk),” it said in its submission. “The audit requirements should not be so onerous that the MGA’s compliance team is so focused on audits that they cannot perform their primary tasks to reduce consumer harm.”
It suggested that FSRA, instead, could audit MGAs annually, with insurers relying on those results. Or FSRA could provide a recommended audit compliance checklist for insurers, which would allow MGAs to provide the same set of documents to all insurers.
While MGAs and insurers have interpreted these assessments as “audits,” Harold Geller, principal of Ottawa-based Geller Law, says he would like to see FSRA take responsibility for them.
“I don’t see that in the proposal. I want [FSRA] going in and looking, what’s your compliance program. Where have you found red flags? How have you dealt with red flags. How have you dealt with people with lapses?” says Geller, who specializes in representing investors in civil court and in cases heard by regulators.
Orphaned clients
The rule also aims to address the problem of orphaned clients, mandating that MGAs have client continuity plans to ensure that when agents leave an MGA, clients continue to receive service from an agent that’s adequately supervised and monitored.
However, Geller said this will be tough to do in practice without changing the way agents are compensated.
“It’s easy, by fiat, to say that there must be a continuity. And from the consumers’ point of view, there is a real interest in knowing that somebody will be taking care of your policy,” he said.
After the initial fees and commissions are earned on the sale of a policy within the first couple of years, ongoing trailing fees are too small to incent another advisor to take over the client, he said.
“An insurance agent doesn’t have a duty to a non-client. When they become the agent of record, they’re now exposed. How are they going to be compensated?” he said. “I think this will fail in practice, and it’s because the compensation doesn’t flow with the obligation. If they went back to level commission (where an agent would be paid a steady fee each year for the life of the policy), that would change things.”
Comments submitted flagged additional issues, including a lack of clarity on the definition of an MGA. FSRA’s Consumer Advisory Panel submitted a comment saying that the rule’s lack of flexibility for smaller MGAs could put some out of business, and also questioned why the rule does not address the tiered commission structures that some MGAs use, which it said conflict with consumer protection.
Shared accountability
While the rule imposes new requirements for MGAs, it does not remove or diminish insurance companies’ responsibility for agent monitoring and compliance (established under Ontario Reg. 347/04). Instead, it’s seen as a shared responsibility between carriers and MGAs.
Under the rule, insurers are responsible for designing a compliance system that will assess MGA’s and agents’ compliance. Insurers can rely on an MGA’s compliance systems, but they are still ultimately responsible for accuracy and completeness.
Insurance firms have concerns about how accountability will be shared.
The Canadian Life & Health Insurance Association (CLHIA) said it strongly supports Ontario and FSRA’s goal of introducing an MGA licensing regime.
But in its submitted comments to FSRA, it said the rule’s “lack of clearly and separately defined roles and responsibilities for insurers, MGAs and agents … will lead to confusion and overlapping compliance obligations which will make it challenging for insurers and intermediaries to implement policies and processes that achieve fair treatment of customers.”
Canada Life in its submission suggested it would be more appropriate for MGAs to have primary responsibility for agent oversight.
“An insurers’ inability to see an agent’s entire book of business is in our view the reality that made a reconsideration of oversight in the MGA channel necessary. After the time and resources that have gone into this exercise, maintaining insurers as primarily responsible for the day-to-day oversight of agents would in our view not be a satisfactory or appropriate outcome,” it said.
Some of the insurers’ concerns were echoed by the Canadian Association of Independent Life Brokerage Agencies (CAILBA). In its submission, the MGA association noted the definition of MGA needs to be clarified, and also suggested FSRA should play a “significant role” in overseeing MGAs. It noted that the rule does not “clearly separate the roles and responsibilities of FSRA and the insurers for the oversights of MGAs.”
CAILBA also noted it was “crucial” to outline clear responsibilities for the regulators, MGAs and insurers, suggesting that “MGAs should have oversight of the agent compliance profile, and FRSA and the insurers should have oversight of the MGAs.”
Indeed, multiple stakeholders complained about a lack of clarity in the rule.
“It’s principles-based, so nobody really knows what’s being (proposed),” Geller explained.
FSRA has already said it’s considering issuing accompanying guidance to the rule, that would help industry understand how to comply with the principles-based, outcome-focused rule.
Advocis, the national association for advisors, said it was pleased to see that the rule doesn’t diminish insurers’ responsibility for agent oversight.
It argued that while some parties have argued the reform presents an opportunity to reduce regulation, and therefore costs ultimately borne by the consumer, it’s not appropriate to shift the balance to MGAs because of their dependence on insurers to do business. It pointed to “a clear imbalance in bargaining power [that] exists between MGA and insurer,” that could result in “suboptimal policies and procedures being developed and implemented on the part of the MGA for their oversight of the agent” that hurts consumers.
What happens next?
While FSRA is aiming for the rule to come into force next June, it hasn’t yet decided on an appropriate transition period for licensing to take effect. Industry participants suggested anywhere from 12-24 months.
FSRA may revise the proposed rule to incorporate feedback it received during the consultation period. If the revisions are significant, the regulator would hold another round of consultations.
For agents who work with L&H MGAs, the proposed rule introduces new requirements, including avoiding or managing conflicts of interest and promptly providing compliance information requested by insurance firms or MGAs.
But Da Costa says the main impact for agents will be on their mindset towards MGAs, as their dealings with the agencies will now be just as regulated as their dealings with insurance firms.
“It’s no longer this sort of grey area within the distribution chain. If an MGA now reaches out to the agent and asks for documentation or for them to verify and do their audits, now there’s nothing to push back on, because before agents could say, ‘Well, you’re not even licensed. Why are you asking me for this?’”
Kelvin Chong, an Ottawa-based insurance agent and principal of Kelvin Chong Life Insurance Brokers, said he believes the rule will require better communication between insurers and MGAs, which sometimes operated in a siloed way.
“[It’s about] having the open discussion … I think there’s going to be clear lines of communication, and we’ll be able to work more as a collective.”
He also noted that the decline in captive agents and the rise in MGAs over the decades has resulted in gaps in training and mentorship for new agents that require a collaborative approach to solve.
“I believe the insurance companies as well as the MGAs have to take some sort of responsibility around them,” he said.