A provincial regulator, the Insurance Council of British Columbia, has published what some in the insurance industry consider to be a sneak preview to the national regulatory report on the distribution of life and health insurance that’s due later this month. (See story above.)

“If you look at the ICBC paper, to a great extent, that’s what we will see from the [Canadian Council of Insurance Regulators],” says Lawrence Geller, president of Campbellville, Ont.-based L.I. Geller Insurance Agencies Ltd.

The CCIR says it will release its paper any day now, but the ICBC’s discussion paper, distributed in October 2010, describes the same fundamental challenges that apply in every province and territory.

In an effort to enhance public confidence in the insurance sector, the ICBC paper, overseen by executive director Gerry Matier, calls for tighter mandates regarding accountability and supervision in three areas:

> The supervision of new life agents with fewer than two years’ experience in the field.

> The responsibilities of life insurance agencies and the formal policies they have in place to supervise the insurance- and non-insurance-related activities of insurance agents operating on their behalf.

> Clarity regarding what a managing general agency is and a clearer definition of MGAs’ accountabilities and responsibilities to the public they serve.

The CCIR’s paper is expected to focus more squarely on the MGAs themselves, and the ICBC paper makes several recommendations on that front. At the core of the ICBC paper is the concept that an MGA needs to “know its life agents,” which includes knowledge of:

> The work experience of an advisor, including education, training, past sales experience and the amount and type of business being conducted.

> More scrutiny of the amount of experience the MGA has had with a new advisor.

> An advisor’s product “expertise” — i.e., if an agent starts placing business in a different area of life insurance, the MGA should take steps to be satisfied the advisor is competent in that field.

> Monitoring sudden changes in sales volume, either a significant increase in the business being placed or significant numbers of cancellations.

The ICBC paper stresses the importance of oversight of new advisors’ training in several areas because, the way it exists now, no one is examining or approving the products new life agents are selling, says Matier: “Today, a new agent with less than three years’ experience could theoretically sell a multimillion-dollar policy — and it’s not clear who is supervising those choices.”

To remedy this issue, the ICBC paper suggests that a new advi-sor be required to work under the direct supervision of a “qualified” or experienced advisor for the first two years of his or her career. Says Matier: “We believe that two years is a long enough period to gain an accurate understanding of the industry, its products and who they are suitable for.”

An advisor might be considered “qualified” to sell without supervision with less than five years’ experience if he or she holds more accreditations, such as the chartered life underwriter designation offered by Advocis or the certified financial planner designation offered by the Financial Planning Standards Council.

The ICBC paper also calls for more accountability for the activities of life agencies, which are either owned by or employ advi-sors to sell insurance.

As of March 2010, the ICBC reports there being 1,666 life insurance agencies and more than 12,000 life insurance advisors operating under its purview — and most of these agencies don’t have formal policies or procedures in place that govern their business practices or their advisors.

The ICBC paper suggests that life agencies formally document what procedures they have in place to ensure that a client’s best interest is being put first; what the agency is doing to monitor advisors acting on the agency’s behalf; and any non-insurance-related activities that are not overseen by other regulators.

The ICBC paper is available on the regulator’s website (www.insurancecouncilofbc.com).

Ultimately, says Matier, the goal of the ICBC discussion paper was not to change the landscape of the industry dramatically but to define clearly a set of new minimum standards for life insurance advi-sors, agencies and MGAs.

The ICBC had accepted feedback from the insurance industry until the end of 2010 — and it expects to deliver either firm rules or guidelines, says Matier: “Either way, there will be a fair amount of new mandates coming into play. The public wants a clear line of accountability with respect to agents and MGAs.”

Byren Innes, principal and senior vice president with Toronto-based insurance consultancy NewLink Group Inc., says the industry is anxious because of uncertainly around what the CCIR paper will say and how industry players can react: “The sooner the better, so they can get on with things.” IE