The Financial Services Regulatory Authority of Ontario (FSRA) has proposed new guidance to set out suitability requirements to hold a life insurance agent license in the province and the conduct of MGAs.
Proposals come as there needs to be more clarity on what “suitability actually means for a professional who sells life insurance,” according to Huston Loke, executive VP of market, conduct at FSRA.
This guidance has been informed by insight into the inner workings of the industry, including the MGA sector, where the majority of gross written premium is distributed for these types of products.
"We felt that it was necessary to clarify MGA expectations," Loke said. “The majority of agents out there are going to be professionals that are looking to take care of their customers, but there’s a small number that may treat this as perhaps a different type of profession.”
In an interview with Insurance Business, Loke spoke about what types of malpractice have necessitated this type of guidance, how it will look in practice and why consumer input is important to make better regulations.
According to investigative findings released by FSRA in 2022, the agency found the following areas of concern in three MGAs.
The three MGAs that were singled out were Greatway Financial Inc., World Financial Group Insurance Agency of Canada Inc. and Experior Financial Inc.
Furthermore, unethical agent behaviour may include not disclosing conflicts of interest or providing false or misleading information about a product, FSRA has said.
This review was the first of its kind and was led by FSRA for the Canadian Council of Insurance Regulators (CCIR).
“We’ve identified a number of breaches of laws or regulation, bankruptcies, consumer proposals and providing false statements to the regulator,” Loke said.
“This is going to impact life agents’ suitability, and we may refuse an applicant, if they if they show conduct like this.”
FSRA will enact a six-point action plan that includes the following:
“This guidance is a key piece, because defines what it takes to become an agent,” Loke said.
“We know that the majority of agents out there are looking for a consistent standard and this makes it easier for them to understand what we're going to be looking for as part of the licensing process.”
Elsewhere, the consumer education campaign is integral to make sure those who are purchasing a product can be well-informed about the options out there to have more productive conversations with agents.
The guidance is set to be consulted on until February 24th, 2024.
“This is the start of a conversation with industry,” Loke said. “We have already reached out to stakeholders to ask them to comment.”
Consumer input is expected to play a critical part in the process.
“We want consumers to be represented as this is for them,” the EVP said. “It must be to a level where they would say, ‘I just thought you were already doing this.’”
This is especially important since life insurance is a decades’ long product, and it may not be as easy to opt out of a policy then find a similarly favourable rate as when a consumer first signed up.
Sound off in the comments section on what you think life insurance guidance should include.
