A review in Ontario of life insurers’ supervision of managing general agencies (MGAs) found gaps that the province’s financial services regulator aims to fill.
The Financial Services Regulatory Authority of Ontario (FSRA) conducted a review to assess the insurer-MGA relationship and how MGAs uphold standards for treating customers fairly.
The province has no regulatory framework in the life and health insurance sector specific to MGAs; however, industry regulations and guidelines set out policies that insurers are expected to implement to manage and oversee their relationships with MGAs.
FSRA’s review, conducted from September 2020 to March 2021, comprised small and large life insurers, accounting for about 50% of Ontario’s life insurer market share.
Among the findings was that contracts between insurers and MGAs didn’t explain in detail MGAs’ oversight of agents — delegated by the insurers — regarding such things as screening, training and monitoring.
Insurers also lacked detailed processes to assess risks associated with their contracted MGAs. For example, while insurers’ compliance review surveys confirmed whether or not MGAs had policies and procedures in place for supervision, those reviews didn’t verify that the policies and procedures were in effect and functioning.
Further, insurers didn’t conduct “a meaningful volume” of agent reviews to assess if agents complied with regulatory obligations and best practices, FSRA said. The reviewed insurers each conducted 40 to 180 reviews of independent agents annually, despite having contracts with 11,000 to 36,000 agents, the review found.
FSRA said it will use the review findings to develop a proposal for a regulatory framework and supervisory approach for distribution channels that rely on MGAs.
It also plans to build supervisory capacity to oversee insurers and agents that rely on MGAs. This may mean overseeing agents directly or by working with insurers or MGAs, the regulator said.