The Financial Services Regulatory Authority of Ontario (FSRA) has expanded on proposed guidance for life insurance agents and MGA suitability in the province following its findings that some firms were employing practices that could prove “unfair” to customers, with new guidance threatening fines when businesses fail to disclose past failings.
“Assessing licensing suitability is a key regulatory control for FSRA,” said Tim Miflin, the organization’s senior manager of policy, in a Wednesday webinar. “We want to be transparent in relation to our role as a gatekeeper and allow our applicants and agents to understand how past and current conduct may affect their suitability to hold a life insurance agent license.”
In a recent review, the FSRA identified shortfalls in compliance as well as a lack of clarity in the responsibilities shared among insurance companies, MGAs and independent agents.
“We have seen examples of a lack of agent training supervision, product sales that were unsuitable product sales to customers and their individual needs, while also finding agent recruitment and compensation models that may lead to their unfair treatment of customers,” Miflin said.
“With over 60,000 agents in Ontario, strong gatekeeping is necessary to ensure agents are suitable and qualified, which reduces the risk of non-compliance and potential consumer harm,” added Jelena Pejic, FSRA’s director of licensing.
The FSRA suitability requirements is intended to tackle inefficiencies and unsavoury behaviour patterns witnessed within life insurance.
The regulator is seeking input from life insurance industry figures on the guidance until February 9th.
The FSRA criteria to address life insurance agents and MGA issues are:
Under the plan, a sponsoring insurer would have a core role in screening life insurance agent applicants.
“The sponsoring insurer will initiate the application and they will need to certify that they've taken steps to screen the applicant and are satisfied that the applicant is suitable to carry on businesses as an agent,” Pejic said.
Suitability disclosures were another key facet of the new guidance and transparency failures could lead to fines, the FSRA has cautioned.
“I want to stress that when an applicant discloses information that may affect their suitability, the guidance does outline that the information should fully and accurately detail the surrounding circumstances, including when the conduct occurred, what led to the conduct, and any corrective steps that have been undertaken,” Pejic said.
Suitability evidence that the FSRA expects life insurance agents to disclose under new guidance includes:
Simply disclosing this type of information on the application does not mean that an application will be refused. Instead, it will be used to adequately assess suitability to be licensed and any risks tied to that suitability and resolve those appropriately, according to the regulator.
If any information was not correctly given to the FSRA, there is a possibility of monetary fines being imposed on agents.
“The suitability assessment is not only tied to the license application,” Pejic said.
“The assessment can take place at any time during the licensing term, if FSRA does become aware of any new information, potential misconduct or misleading or false statements on previous applications, the organization may take actions to reassess the suitability of the licensee, which may lead to action against their license.”
The onus is on the applicant to ensure they review each question and respond accurately and in full.
“A key factor in our gatekeeping is identifying if an agent did not conduct themselves with honesty and integrity,” Pejic said. “A non-disclosure or lack of honesty when interacting with the regulator is a key indicator that will cause concern and may lead to the refusal of an application.”
In addition to life insurance agent suitability, MGAs must also follow similar guidelines.
“For an MGA to be considered suitable, it must demonstrate that it has the expertise and resources to operate in a trustworthy and competent manner,” Miflin said. “The talent they recruit, train, supervise, support, either directly or indirectly through sub agents, must be suitable for licensing.”
Life insurance companies have an obligation to have a system in place to monitor the suitability and compliance of agents who act on their behalf, and this includes reporting to FSRA, it was stressed.
“Importantly, where oversight functions of the insurer have been delegated by that insurer to an MGA, the insurer retains accountability and responsibility,” Miflin said.
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