One reader raised the flag of concern over the relationships and business activities between advisor and insurer after reading the article, ‘Growing popularity of MGAs demands regulation: broker.’
“The concern with MGAs, and all insurer/broker relationships, is the potential for undisclosed conflicts of interest when the MGA/insurer is owned by a brokerage or by a groups of brokers, or when the broker and MGA/insurer have common ownership and/or investment and/or debt partners, or when there is a unique remuneration structure,” commented Greg Shields. “Most insurance buyers, personal and commercial, are not aware of unique relationships between their advisor(s) and insurers; and they make the reasonable, but unfortunately incorrect, assumption that government regulators are actively monitoring these relationships and the business activities of the many parties to the transaction.”
It was one Sudbury, Ont. broker who had taken part in the Rating MGAs survey, which closed on Friday, who told Insurance Business in a follow-up interview that as managing general agents play a larger role in broker underwriting, there will be a need for some kind of regulation.
“Brokers are required to have so many hours of training and insurers are required to have a license,” she said. “MGAs are currently operating in a sort of grey area. As brokers turn to MGAs more and more – sometimes on a daily basis – there will be a need for some sort of regulation.”
For Shields, there may be a misconception among the general public that there is indeed a level of regulatory oversight that is in force.
“But the relatively simple words ‘independent’ and ‘transparent’ seem to be very confusing to some people in the Canadian insurance industry,” wrote Shields.
