As managing general agencies (MGAs) play an increasingly important role in the distribution of life insurance, they have a responsibility to monitor their agents closely and watch for potential misconduct, according to regulators who spoke at the Canadian Association of Independent Life Brokerage Agencies’ (CAILBA) national conference in Niagara-on-the-Lake, Ont., on Wednesday.
“We see [MGAs] as a key partner and a key player in the regulation of insurance,” said Gerry Matier, executive director of the Insurance Council of British Columbia (ICBC). “The role of the MGA is one of knowing the agent. It is key for you to know who you’re dealing with.”
In particular, the ICBC is relying increasingly heavily on MGAs to identify any potential cases of agent misconduct, Matier said.
“MGAs play a very good role for the regulator,” he said. “They see a lot of the things that we don’t get to see, and at the same time, they have the same interests that we have. They no more want to be dealing with problem agents than we want to be dealing with problem agents; and, often, we find that they are in a great position to see potential clues that would help to identify problems down the road.”
In turn, the ICBC has set up a quasi “help line,” inviting MGAs to call the regulator in cases in which they identify a potential problem with an agent’s conduct. The initiative has already been effective, Matier said.
“A number of [MGAs] have come forward to us,” he added. “We have been able to identify problems and deal with them, in probably a much quicker manner.”
Regulators are not permitted to notify firms when their agents are the subject of an investigation because of privacy laws, Matier noted. Thus, MGAs should require their agents to notify the firm when they’re being investigated so that MGAs can keep a closer eye on those agents’ activities.
Regulators in other provinces also acknowledged the increasingly prominent role that MGAs play in the industry.
In Saskatchewan, regulators are moving forward with establishing a new licensing category for MGAs in order to reflect the unique role these entities play in the distribution process. In other provinces, MGAs are licensed as insurance agents.
Regulators in Quebec are also exploring the possibility of creating a new licensing class for MGAs, said Patrick Déry, superintendent, solvency with the Autorité des marchés financiers.
“This is something that has been discussed in Quebec over the last few years,” he said. “We at the regulator think this is something that we are due to consider, as MGAs are, nowadays, a key aspect of the distribution chain.”
Other regulators said they are watching these developments closely to determine whether this kind of new licensing class would be beneficial.
“Nothing is being considered right at this moment, but we are certainly looking and learning from our colleagues,” said Warren Martinson, director of legal and regulatory affairs at the Insurance Council of Alberta. “We can learn from each other to see what that kind of licensing can accomplish and how to do it right.
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