FSRA’s new supervisory activities underway for life and health insurance

The Financial Services Regulatory Authority of Ontario (FSRA) will strengthen its supervisory activities for Managing General Agencies (MGAs) and licensed agents in the life and health insurance sector.

Through a joint cooperative review of three life and health MGAs, the FSRA and the Canadian Council of Insurance Regulators (CCIR) have identified four main concerns in market conduct:

Agents were compensated based not only on their own insurance sales, but also on insurance sales made by the people they recruit. This could have motivated the recruitment of individuals who are not yet licensed and resulted in sales by many newly licensed agents
Training of agents lacked important substance, rigour, and reporting mechanisms to ensure they understood and were able to serve customer needs
Relatively complex products were sold by agents without adequate oversight to ensure product suitability and fair treatment of customers
Insurers and MGAs performed minimal formal and proactive supervision of their agents to ensure fair treatment of customers

It was also found that MGAs with a tiered-recruitment business model lacked the necessary mechanisms to protect consumers from being treated unfairly.

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In light of the identified concerns, the FSRA vowed to take the following actions:

conduct a thematic review of life insurance agents licensed in Ontario and contracted with the three reviewed MGAs, which is expected to be completed by end of 2022
develop an expanded supervisory plan and initiate a review of selected insurers contracted with these reviewed MGAs in the fall of 2022
release draft interpretation guidance for public consultation in the fall of 2022
draft a proposed rule to enhance the MGA regulatory framework, planned for public consultation in 2023
consider appropriate regulatory action

This comes on the heels of the FSRA’s move to suspend the licenses of 106 health service providers who had failed to file their Annual Information Returns (AIR) between 2018-2021. In late August, FSRA also issued warning letters to other non-compliant health service providers.

“The observations of the review, combined with the rapid growth of these MGAs and newly sponsored agents in Ontario, point to the potential for consumers to be harmed,” Huston Loke, executive vice president of market conduct at FSRA, said in a press release. “FSRA will continue to protect consumers and ensure they receive suitable product recommendations from their life insurance agents.”