The Financial Services Regulatory Authority of Ontario (FSRA) has conducted a review of the life insurance companies operating in the province – specifically, how they supervise the managing general agents (MGA) they work with.
Although there is no separate licence required to operate as an MGA in Ontario, most life and health MGAs perform services that require them to be licensed as insurance agents or corporate agencies. Thus, FSRA has stated that life and health MGAs are required to comply with the legal obligations that apply to agents.
FSRA conducted its review between September 2020 and March 2021, surveying companies that comprise approximately 50% of the Ontario life insurance market share.
The regulator found the following:
- The most prevalent way life insurance is sold is through agents who may represent more than one insurer and who are contracted with an MGA.
- Contracts between insurers and MGAs do not explain in detail what actions MGAs are required to take, and what standards they are required to meet, for screening, training, and monitoring insurance agents.
- Insurers lack an in-depth process to assess the risks associated with their MGAs. A comprehensive risk assessment helps insurers to identify higher risk MGAs that may require more attention.
- Insurers do not conduct a meaningful volume of agent reviews to assess if they comply with regulatory obligations and industry best practices.
FSRA also offered a reminder that insurers must maintain a system to oversee agents acting on their behalf to make sure that they comply with the Insurance Act, its regulations, and the agent’s licence requirements. Insurers are obligated to do this for all agents, including insurer-contracted MGAs, FSRA advised.