The Financial Services Regulatory Authority of Ontario (FSRA) continues to keep tabs on the life insurance managing general agent Greatway Financial, which has been accused of encouraging its agents to sell a complex life insurance product without consideration for clients.
The regulator alleged that Greatway focused its sales entirely on universal life insurance – an insurance product typically used by high-net-worth individuals for estate planning – and that it also trains its agents to sell the product to customers regardless of their income or needs.
FSRA further purported that Greatway had instructed its agents to downplay the insurance side of the product and focus instead on the investment returns. Allegedly, training material from Greatway had instructions in red letters to “DO NOT HIGHLIGHT” the critical risks of universal life insurance.
Financial planner Vanessa Cline, who helps former Greatway clients, explained that with universal life insurance policies, the cost spikes with age. This means that the product can quickly divert payments away from the investment side and leave customers with a lifetime of rising costs, she warned.
“When [clients] get to retirement and they need the money the most, the cost of the insurance inside these policies is so high that it quickly depletes the cash value that has built in these policies, to where these policies lapse,” Cline told The Canadian Press.
The FSRA issued a compliance order against Greatway last year, which ordered the MGA to revise its training for contracted agents. It also ordered Greatway to send existing universal life insurance policyholders information that would allow them to understand if the product is appropriate for them. Greatway consented to the order but has disputed some of the FSRA’s findings.
As part of FSRA’s compliance order, Greatway has also been ordered to destroy all previous teaching materials and complete the retraining of its agents by the end of March.
The Canadian Press reported that the enforcement action against Greatway is part of a larger effort by the FSRA and other regulators that are looking into the risks made by multi-level marketing companies like Greatway. Greatway’s business model is based on its agents getting paid through commissions on their own sales, plus a portion of the commissions made for agents they successfully recruit into the company.
Concerns over the sudden growth of Greatway were also raised by the FSRA, particularly as the rapid growth meant that the company would have plenty of inexperienced agents who might misconstrue universal life insurance policies.
According to the FSRA, Greatway went from 1,400 agents selling 13,000 policies in 2018 to 4,000 agents selling nearly 28,000 policies last year.
“You put that situation together with training materials that we believe to be inappropriate, then you have a recipe for customer harm,” FSRA executive vice president of market conduct Huston Loke told The Canadian Press.
