2024 0209 - FSRA - [2023-015] - Comments - Consultation for Proposed Guidance on Life Insurance Agent & MGA Licensing Suitability 

  • 2024 0209 - FSRA - [2023-015] - Comments - Consultation for Proposed Guidance on Life Insurance Agent & MGA Licensing Suitability  ---  [BonkNote]

  1. BonkNote Comment - FSRA's Life Agent and MGA Suitability Guidance - [2023-015] - 2024 0209 - 2p
  2. CAILBA - The Canadian Association of Independent Life Brokerage Agencies - Phil Marsillo - [FSRA-2023-015] - 2024 0222 - 3p
  3. Canada Life - Andrew Fitzpatrick - [FSRA-2023-015] - 2024 0223 - 4p
  4. CAP - Consumer Advisory Panel - [FSRA-2023-015] - 2024 0116 - 2p
  5. CLHIA - Canadian Life and Health Insurance Association - Lyne Duhaime - [FSRA-2023-015] - 2024 0223 - 10p
  6. Desjardins Group - Giuseppina Marra - [FSRA-2023-015] - 2024 0223 - 5p
  7. FAIR Canada - Jean-Paul Bureaud - [FSRA-2023-015] - 2024 0209 - 3p
  8. FINANCIAL HORIZONS - Nick Pszeniczny - [FSRA-2023-015] - 4p
  9. Happy Financial Services - NARINDER P SUDAN - [FSRA-2023-015] - 2023 1123 - No Attachment
    • Hi I found it very interesting & informative. I request there should be webinars on best practices time to time making the advisors more efficient and helping them to write trouble free business. Thanks
  10. HUB Financial - HFI - Andrew Fink - [FSRA-2023-015] - 2024 0223 - 3p
  11. iA Financial Group - Renée Laflamme - [FSRA-2023-015] - 2024 0223 - 3p
  12. IDC Worldsource Insurance Network Inc. - Phil Marsillo - [FSRA-2023-015] - 2024 0222 - 2p
  13. IFB - Independent Financial Brokers of Canada - Susan Allemang - [FSRA-2023-015] - 2024 0209 - 3p
  14. PPI Management Inc. - Cathy Hiscott - [FSRA-2023-015] - 2024 0223 - 4p
  15. Primerica Financial Services - John A. Adams - [FSRA-2023-015] - 2024 0226 - 3p
  16. W.P.G - The Wealth Planning Group Inc - Jason Bonneteau - [FSRA-2023-015] - 2023 1123 - No Attachment
    • I wanted to commend the FSRA for finally looking into deceitful practices of multi level marketing companies like [insurance company] and others that consistently bring on unqualified part time people into the financial industry. Multi level market agencies should have no place in financial services. They promote "recruitment" and agencies rather than client needs. I look forward to watching new rules coming into affect which would greatly prohibit this recruitment style agency.
  • 2. CAILBA - The Canadian Association of Independent Life Brokerage Agencies - Phil Marsillo - [FSRA-2023-015] - 2024 0222 - 3p
    • (p2) - The proposed guidance rightly emphasizes the importance of thorough training, education, and ongoing professional development for life insurance agents and MGAs.
      • [Bonk: Social Media Influencers]
    • setting clear expectations for licensing suitability
    • distribution of insurance products has changed over the course of the past 2 decades
    • each participant in the chain knows
    • (p2) - In conclusion, we support FSRA’s desire to implement the proposed guidance on life insurance agent and MGA licensing suitability but insist on clarity of roles & responsibilities in conjunction with legislative support to achieve the desired outcomes.
    • By doing so, we believe FSRA will play a crucial role in upholding the highest standards of professionalism, ethics, and consumer protection within the life insurance industry.
  • 3. Canada Life
    • ... strong objection to language in the Proposed Guidance suggesting FSRA may deem a principal agent relationship to exist between insurers and agents and MGAs and agents.
    • New Brunswick and Saskatchewan, have created in legislation a distinct MGA licence category. We believe this is a preferable approach that would elevate the expectations in the Proposed Guidance to have the force of law.
    • Insurance Act, R.S.O. 1990, c. I.8 (the Insurance Act).
    • consumers expect financial intermediaries to be licenced and regulated by governments or government agencies.
    • The most robust means to accomplish this is by way of an explicit licence with explicit requirements and responsibilities spelled out in law and regulation. We believe this approach is preferable to attempting to accomplish the same ends by way of a guidance document.
    • words, “that deals with the public”. It is our view that the reference to dealing with the public is not necessary and somewhat ambiguous.
      • We note similar definitions in Saskatchewan and New Brunswick do not include a public facing element. It is also not obvious that MGAs deal with the public, they deal primarily with agents and insurers. Indeed, it is quite normal that the ultimate insurance consumer is not aware an MGA is involved in their transaction. Therefore, we suggest deleting the words, “deals with the public and” from the definition.
    • MGAs are subject to this Guidance, even if they operate under other labels, such as “National Accounts.” We agree that it is the activities that are important not what an entity may hold itself out as and that national accounts are properly in scope.
    • [Objective vs Subjective] - In the commentary on accessing an applicant’s suitability and in Appendix A, we contrast objective factors such as criminal charges, breaches of regulations and bankruptcy filings, with subjective factors such as, “failing to diligently perform” and “any other behaviour.”
      • Discretion at the regulator level may be appropriate and founded in legislation. However, to the extent insurers will be expected to monitor suitability on an ongoing basis against these subjective factors, there will likely be differing interpretations. This suggests: 1) more specific and objective guidance would be helpful, 2) while insurers acknowledge their responsibility to contract with only suitable intermediaries, regulators are better placed to be the arbiters of these subjective matters on an ongoing basis.
    • In terms of FSRA’s assessment of suitability being guided by its statutory mandate, we agree and would highlight the promotion of public confidence in the sector. In our view, this is best accomplished by the regulator playing the leading role in oversight and in the case of MGAs, through an MGA-specific licencing model.
    • Suitability - Additional considerations for Managing General Agencies
      • As mentioned above, many elements of the Proposed Guidance are very subjective, for instance, “has the expertise and resources to operate as an MGA in a trustworthy and competent manner, and that it conducts all such activities in (a) diligent, trustworthy and competent manner”, and “adequate compliance functions.”
      • [Bonk: Social Media Influencers - Not everybody can be right. Jail, Nonsense, eggriegous. ]
      • There is no equivalent in insurance to the Canadian Securities Administrator’s National Registration Database
      • Size of MGAs
      • errors and omissions or cyber insurance.
    • Insurer supervision of MGAs
      • The fact is, some insurers may be reluctant to act as a kind of whistleblower, especially if the agent/MGA in question can continue doing business with other insurers unless and until FSRA takes licencing action. This points once again to what we see as the proper and central role of the regulator in oversight.
        • [Bonk: 1990s - Prudential / MetLife]
      • We welcome the statement, “reasonable reliance by a regulated entity on the credible functions and activities of another regulated entity which was contractually obligated to perform such function or activity on behalf of the first regulated entity, will be considered as a mitigant when determining the appropriate sanctions against the first regulated entity for any non-compliance.”
        • While not relieving insurers of their ultimate responsibility, this statement acknowledges commercial reality that sees functions delegated to sophisticated MGAs by way of detailed contracts.
    • Life Agents may be held to be a principal – Agent Relationship
      • We have grave concerns with the inclusion in the Proposed Guidance of language related to agency law and the principal agent relationship between insurers and agents and MGAs and agents.
      • A finding that a principal-agent relationship exists is a determination properly left to the courts or the legislature.
        • We do not disagree with the assertion that MGAs and insurers may, by operation of agency law, be held responsible as principals for the conduct of life agents. This is a simple statement of the law. These decisions are very fact specific, and as a common law principle, interpreted and applied by courts. This is factual and not contentious.
      • We do not believe that FSRA has the legislative mandate to make legal determinations of agency law and that to do so is beyond the scope of FSRA’s and the Financial Services Tribunal (FST) subject matter expertise.
      • nor have we been able to find any appeal level or judicial review cases involving FSRA or the FST reliance on, or application of, the principles of agency law in carrying out their statutory mandate under the Insurance Act.
      • Administrative law requires that regulatory authority must be evident from: (1) the express provisions of the relevant statutes or (2) by necessary implication from such statutes (see ATCO Gas & Pipelines Ltd. v. Alberta (Energy & Utilities Board) 2006 SCC 4.). There is no express provision in the Insurance Act imposing liability on insurers for the conduct of life agents based on an agency relationship. Indeed, there is an express provision exempting life agents from such liability (see below). Therefore, FSRA would have to demonstrate that applying principles of agency is a necessary implication of fulfilling the purpose of the legislation. The lack of precedent suggests this is not the case.
      • We note s. 394(1) of the Insurance Act, as an example of a statutory provision deeming an insurance agent or broker to be an agent of an insurer.
        • However, what is most pertinent is s. 394(2) which states that this section does not apply to life insurance. This is evidence of the fact the legislature turned its mind to circumstances in which life agents should be deemed agents of an insurer.
        • In seeking to make these determinations, FSRA would be substituting its judgement for that of the legislature.
    • In summary on this point, we are strongly of the view that finding a life agent an agent of an insurer or MGA is properly left to the courts or the legislature. If FSRA were to proceed in this direction, we expect it would open itself up to protracted litigation and judicial review thereby eroding public confidence in the regulatory regime.
    • Notwithstanding our stated preference for an MGA licencing model and serious concerns with the inclusion of agent and principal language in the licencing suitability guideline, the fact FSRA is seeking to address oversight and suitability in the modern insurance context is appropriate.
  • 4.  CAP - Consumer Advisory Panel
    • consumer perspective
    • 2019/2020 Market Conduct Summary of Life Agent Reporting Form. The Report identified gaps and a lack of clarity regarding the roles and responsibilities of insurers, Managing General Agents (MGAs), and independent agents; including, a lack of agent training and supervision, unsuitable product sales, and agent recruitment and compensation models that may lead to unfair treatment of customers.
    • FSRA’s transparency in sharing these findings the roles and responsibilities of insurers, MGAs, and independent agents, incorporating stringent standards for agent training, supervision, and ethical conduct.
    • best practices
    • Enforcement Measures: Strengthen enforcement mechanisms to deter non-compliance and penalize entities engaging in unfair business practices.
    • 5. Whistleblower Protection: Implement robust whistleblower protection mechanisms to encourage individuals to report unethical or illegal activities without fear of retaliation.
    • 6. Consumer Education Campaign - Launch a targeted consumer education campaign to empower consumers to make informed decisions based on a clear understanding of both the type and standard of services they should anticipate when dealing with insurers or their representatives.
    • ⇒  Furthermore, in line with FSRA’s Unfair or Deceptive Acts or Practices Rule (UDAP Rule), we support holding an insurer or MGA responsible for consumer harm that has been incurred or is likely to occur, if there is a significant connection between the creation or elevation of risk and the conduct authorized by the insurer or MGA.
      • [Bonk: Social Media - Company Sales Trainers - MGA VIDEOS]
  • 5. - CLHIA - Canadian Life and Health Insurance Association - Lyne Duhaime - [FSRA-2023-015] - 2024 0223 - 10p
    • Recognizing MGAs in legislation, not guidance, would better protect consumers
      • the Insurance Act has fallen behind the evolution of the industry and does not reflect any roles and responsibilities for MGAs.
        • 1 The term MGA includes National Accounts and Associate General Agencies.
        • [Bonk: Regulators are always behind the Companies]
      • Regulatory guidance is most effective when it interprets the law. In this case, the legal framework is lacking – the Insurance Act must be modernized to better reflect how insurance is distributed in Ontario.
    • Insurers’ overall line of sight is limited and ineffective
      • The role that MGAs play in facilitating and overseeing the sale and ongoing service of insurance has a direct impact on their advisors and their customers.
      • In this context, no Guidance can address the structural limitations that currently prevent the appropriate monitoring of behaviours to enhance consumer protection. Life insurers
        only have oversight and influence over an MGA’s activities as it relates to the life insurer’s own products. Life insurers cannot, in practice, supervise and oversee the entirety of the MGAs distribution activities.

        • [Bonk: 1) SOA: Companies Can't control agents. 2) Social Media - Company Sales Trainer, MGA Trainings]
      • The MGA has the best view of the advisor’s overall business practices and is able to spot potential concerns sooner.
        • [Bonk: 1) SOA: Companies Can't control agents. 2) Social Media - Company Sales Trainer, MGA Trainings]
        • As presented, the guidance only ensures an analysis from each individual insurer’s perspective, not from the consumer perspective.
      • ⇒  The proposed Guidance’s shortcomings highlight the need for FSRA to have the right powers, aligned with the reality of today’s insurance distribution market, to better protect consumers.
    • Relying on MGA - insurer contracts leads to inconsistent customer experiences
      • Currently, life insurers establish a “quasi-regulatory” oversight framework underpinned by their contracts with MGAs. However, relying solely on life insurers’ contracts with MGAs to enforce regulatory requirements does not result in the best outcomes for consumers.
        • For example, life insurers, agents, and MGAs can adopt different contractual standards, expectations, enforcement standards and penalties depending on how the contract
          between them was negotiated. As well, contract clauses are always open to interpretation and re-negotiation, meaning they are understood differently or changed over time. As mentioned, these differences lead to inconsistent consumer experiences and add cost and complexity to the system. Customers should have a similar experience purchasing insurance products regardless of the insurers and MGAs they choose to work with. Transparent and easily accessible expectations and requirements ensure the fair treatment of customers and promote confidence.
        • For the customer to be treated fairly throughout the product life cycle, they should be aware of each participant in the process and their respective roles and responsibilities.
          • For example, customers should be aware that MGAs provide services to agents such as training and sales strategies and are compensated for their role. This transparency empowers customers to make more informed decisions, like whether to report intermediary misconduct.
          • [Bonk: Consumer - Law: Duty to Read, Reasonable Person, Justifiable Reliance, Statute of Limitations, Incidental Advice, Authority]
        • For example, consumers should not need to consult multiple sources of information to understand the respective expectations and requirements for each role in the distribution chain.
      • Next steps
        • Life insurers want to collaborate with FSRA and market participants to develop a simple, enforceable, statutory framework that directly regulates all parties (life insurers, MGAs and agents) to promote FTC.
        • We believe that FSRA should pause its work on the Guidance to take steps towards a modernized legislative framework.
      • Legislation vs. Guidance and Rules:
      • Reliance on Agency Law falls short:
        • In practical terms, the vast majority of MGAs operate independently and support the distribution of insurance products of a variety of insurers.
        • Very few insurance distribution participants have a model that approximates one in which apparent authority could possibly be found.
        • FSRA’s reliance on agency law to deem a principal-agent relationship to exist “in certain circumstances” is a response suited to the distribution model contemplated by the Insurance Act of the 1990s, when insurers almost exclusively sold products through a career salesforce.
        • If FSRA is looking for greater authority to regulate MGAs, which life insurers support, the proper forum to acquire that authority is in legislation.
      • Specific Concerns
        • The industry has concerns with the broad discretion and subjectivity that FSRA will need to exercise according to the Guidance, which will lead to uncertainty.
      • Purpose and Scope
        • Definition of MGA
          • The Guidance states that the term MGA applies to entities which perform "any functions historically performed by life insurers when they had their own direct agent team as a dedicated/exclusive sales force”.
            • It would be helpful for FSRA to give examples of what is meant by any historical functions.
          • The definition is also problematic because it defines an MGA as an agency that “deals with the public . . .”
            • [Bonk: 1) SOA: Companies Can't control agents. 2) Social Media - Company Sales Trainer, MGA Trainings]
      • Interpretation Misconduct impacts life agent and applicant suitability
        • Objective vs Subjective
      • Suitability—additional considerations for corporate and partnership agents
        • Regulating MGAs by the same criteria and level of materiality as life agents and corporate or partnership agents may unjustifiably put the livelihood of individual agents at risk, including individual agents who have not engaged in any wrongdoing.
          • [Bonk: Contagion}
          • The suspension or non-renewal of an MGA’s license should not be done lightly, and there should be established procedures documented for any disciplinary measures.
          • For example, in the case of life agent misconduct, any disciplinary action against MGAs should be commensurate with the degree of culpability attributable to the MGA, considering not only the conduct of the MGA, but also the potential consequences for the MGA’s customers, whose access to insurance may be affected. There should also be a mechanism for any sanctions against an MGA to be reviewed and/or appealed before coming into effect
        • Suitability—additional considerations for MGAs Adequacy of the MGA’s control and compliance function
          • To limit confusion with respect to each entity’s compliance responsibilities, we believe the MGA and life insurer’s responsibilities should be clearly defined to ensure appropriate and effective accountability.
          • When responsibilities are not clearly defined, standards of what is expected of MGAs differ from one life insurer to another. Customers would benefit from consistency and harmonization of MGA compliance obligations. Life insurers would also benefit from a level playing field, rather than a negotiated standard of compliance obligations.
        • We fundamentally agree that life insurers and MGAs must each take reasonable steps to ensure the agents they contract with are performing as expected.
          • [Bonk: LIFE180 - Matt - Agents are doing exactly what the Companies want]
          • However, the draft Guidance says “In particular, insurers have an obligation to maintain a system to ensure that agents acting on their behalf are compliant and, regardless of whether oversight functions of an insurer (e.g. agent training, supervision and monitoring) have been delegated by an insurer to an MGA, an insurer retains its responsibility.”
            • Based on our understanding of the Agents Regulation, this is not an accurate description of an insurer’s current oversight obligation. The current obligation is to "maintain a system that is reasonably designed to ensure that each agent complies with the Act, the regulations, the authority rules and the agent’s licence". This is an important distinction. While the system must be reasonably designed for compliance—it is unrealistic to expect a compliance system to ensure 100 per cent compliance of all agents, at all times.
          • ⇒ The fact that an agent breaches a regulatory requirement does not mean that each insurer contracted with that agent was in breach of the Agents Regulation; rather, the question with respect to each life insurer is whether they had a system that was reasonably designed to ensure compliance. It is not the regulatory expectation that any life insurer’s system ensures 100 per cent compliance by all agents.
        • For example, are life insurers expected to have heightened screening measures for sponsored vs. non-sponsored agents? This is something FSRA should consult on separately.
        • Life agents may be held to be in a principal-agent relationship
          • Determining whether an agency relationship exists is a question of fact and law requiring analysis on a case-by-case basis. The interpretation of agency law is a matter for the courts as it requires a thorough analysis of several complicated factors. Only a court can provide a definitive ruling on whether agency is established in a particular set of facts. Even if an agency relationship exists, it does not mean that life insurers are responsible for all the activities of the agent, or that it covers all of the aspects of the agent’s work.
          • We recommend deleting this section.
        • An Insurer or MGA may be held responsible for the actions of an agent by virtue of FSRA's UDAP Rule
          • The Guidance states that an insurer or MGA may be held responsible for customer harm by an agent pursuant to s. 2(1) of the Unfair and Deceptive Acts and Practices (UDAP) Rule, stating that it "provides that an insurer or MGA can be held responsible for conduct by an agent, including inaction or omission, that could be reasonably expected to result in outcomes, events or circumstances set out in the UDAP Rule."
            • There is no mention in s. 2(1) that a person can be held responsible for the unfair or deceptive acts or practices of another person.
              • It is our view that FSRA is incorrect in stating that s. 2(1) of the UDAP Rule says an insurer or MGA can be held responsible for an agent's conduct that violates the UDAP provisions.
            • We also do not believe that s. 2(2) is effective in establishing accountability between agents, insurers and MGAs.
      • Approach
      • The industry supports FSRA taking a consumer-centric and risk-based approach to modernizing its regulatory framework, with the inclusion of MGAs as a key stakeholder.
        • While Guidance is an important tool for providing standards, expectations and recommended approaches, without thoughtful legislative and regulatory changes, guidance alone cannot adequately solve these issues and ensure adequate consumer protection.
      • Sponsorship
      • As mentioned, it is not clear if FSRA expects life insurers to adopt heightened screening measures for sponsored agents and if so, what those measures would be.
      • Additionally, the draft Guidance states: "An initial application for an agent’s, including an MGA’s, licence must be accompanied by a statement by the sponsoring insurer certifying that it has taken steps to screen the applicant including the degree of delegation, and is satisfied that the applicant is suitable to carry on business as an agent." [Emphasis added.]
      • Section 3(1)(b) of the Agents Regulation says: "An application for an agent’s licence shall be accompanied by, … a statement by the sponsoring insurer indicating that it has taken steps to screen the applicant and is satisfied that the applicant is suitable to carry on business as an agent."
      • We would appreciate clarification of the basis on which FSRA is inserting "including the degree of delegation" in the Guidance?
    • Appendix B
    • The Guidance states: "In addition to these factors and considerations, where an agent will act as an MGA or perform other duties or activities on behalf of an insurer, additional factors and considerations will apply when determining suitability for the performance of such other duties or activities."
      • ⇒  The industry would benefit from clarity on what those other factors and considerations are.
    • Further, under our proposal for legislative change, MGA’s responsibilities would be undertaken as a part of their legally recognized role in the distribution of insurance, which encompasses their accountability to agents, customers and insurers, and not on behalf of the insurer.
      • Life insurers are limited in their oversight ability and can only review an MGAs information relating to their own products. If the ‘such other duties or activities’ FSRA anticipates here relate to another life insurer’s information, the life insurers will not be able to meet this requirement.
    • Effective date
      • As mentioned, while we share the intended outcome of the draft Guidance to address oversight gaps in the life insurance, we are instead recommending an approach that amends the Insurance Act to reflect the role of MGAs in the distribution network.
      • Regulations under the Insurance Act will also need to be updated.
      • There are numerous moving parts relating to this proposal and we believe that FSRA should pause its work on the Guidance to allow the industry to collaborate with FSRA and the Ontario Government to develop a simple, enforceable, statutory framework.
  • 6 - Desjardins Group - Giuseppina Marra - [FSRA-2023-015] - 2024 0223 - 5p
    • [Intro]
      • We agree that further clarity into the separate or shared regulatory obligations for insurers, intermediaries and distributors is needed, however, we feel a different approach would be more effective to create the overall compliance framework FSRA seeks to achieve, and to mitigate the need for interpretation that parts of the Guidance require.
      • While the introduction of FSRA Guidance and Rules can assist in the interpretation of existing legislation, distribution channels, specifically MGAs have grown and evolved significantly over the past decade or more. As FSRA states in its “Insurer-MGA Relationship Review Report”, the independent agent channel is the most prevalent distribution model, with many agents placing business through MGAs. We believe the most effective way of ensuring consistent suitability standards and oversight is to make appropriate amendments to the Insurance Act (the Act) and companion Regulations, to have a legislative framework that more accurately reflects current industry distribution channels, including MGAs.
      • Further, reliance, at least in part, on insurer contracts, may provide accountability for the insurer, it does not however provide the consistency sought, because legal contracts and agreements are subject to interpretation, change, and vary amongst, and between insurers and intermediaries and distributors.
        • [Bonk: And Consumers]
      • While our recommendation would be to address any perceived gaps in the existing oversight framework by way of legislative updates, should FSRA proceed as proposed and issue the Guidance, we would like to take the opportunity to comment on areas of potential concern, or offer feedback for your consideration.
    • Suitability assessments and responsibilities
      • In the case where certain delegation or reliance are made to MGAs, for example, in the case of some ongoing monitoring activities, the Guidance does not clarify how accountabilities differ between the MGA and the Insurer.
        • Also, clear suitability and responsibility delineations between agents and MGAs (screening or ongoing) are needed to address their different and separate roles.
      • Some other provincial insurance councils have instituted a requirement to report significant events, for example, financial issues, discipline by another regulator, criminal charges, etc., within a prescribed time frame of the event occurring. Generally, reporting is required in a matter of days. However, FSRA only requires these events to be reported at licence renewal or the reinstatement application of their licence.
    • Misconduct of the agent or MGA - [Bonk: Principal / Agent]
      • We agree that each licensee is responsible for their own proper and ethical conduct and compliance with regulatory rules and obligations under the Insurance Act.
        • However, we do not agree with FSRA’s presumptive position that where a contractual relationship exists between agents – insurers, a principal – agent relationship exists and as a result, an insurer or MGA is fully responsible for the actions and conduct of the agent.
        • The Act, Regulations and Unfair and Deceptive Acts and Practices (UDAP) in its current form, does not support these assertions, and a final determination on whether a principal – agent relationship exists should be addressed by the courts, as appropriate.
      • We agree that MGA suitability and its ability to properly recruit, train, supervise or support their life agents, either directly or indirectly through sub-agents, is an important factor in whether they should be granted or maintain their licence to operate as an MGA.
        • [Bonk: How do MGAs Train? Social Media? Where do MGAs get their information? re: How Policies Work, for example.  Minimum Premium / Maximum Premium / LIRP / Loans / Any Plan / Coverage Period]
        • However, we do want to address the fact that swift action to remove or suspend any MGA licence could have a detrimental effect on consumers who may be serviced by a life agent whose ability to conduct business is impacted by such action. Specifically, life agents who are suitable and have not been accused of any misconduct.
      • We are aligned with FSRA on the intended positive consumer and industry outcomes.
        • [Bonk: How do make change without damaging the system?]
      • We are aligned with FSRA on the intended positive consumer and industry outcomes.
        • FSRA’s progressive and proactive approach to regulation in Ontario will help ensure that in partnership, rules and regulations reflect the current landscape and anticipates future evolutions, so that we all continue to deliver on promises outlined in Fair Treatment of Customers Guidance (FTC).
  • 7. FAIR Canada - Jean-Paul Bureaud - [FSRA-2023-015] - 2024 0209 - 3p
    • [Intro]
      • FAIR Canada is a national, independent, non-profit organization dedicated to being a catalyst for the advancement of the rights of investors and financial consumers in Canada.
      • we conduct research to hear directly from investors about their experiences and concerns.
    • From a consumer protection perspective, FSRA’s recent investigations of the distribution and sale of certain life insurance products by agents associated with certain MGAs uncovered alarming issues. It is extremely concerning to learn about the significant risks of consumer harm.
      • For example, because of concerns that inappropriate universal life insurance policies may be sold to consumers, or as a result of serious issues with the training and supervision of the life agents selling them.
    • We are, and Ontarians should be, disturbed that 50% of the 130 life agents contracted with MGAs using a tiered-recruitment business model that FSRA examined failed to comply with the Insurance Act (Ontario).3
      • Moreover, FSRA found:
        • Insufficient disclosure regarding the management of conflicts of interest.
        • Many failures to complete required continuing education.
        • Potential weaknesses in the training and oversight of agents.
        • Numerous failures to follow insurance industry best practices, including with respect to complex insurance products such as universal life policies.4
      • Moreover, there were similarly shocking results from a separate examination by FSRA of 24 client files of life agents contracted with tiered-recruitment business model MGAs. A staggering 80% of the files examined involved the sale of a universal life insurance policy that was not demonstrably suitable for the customer.5
    • FSRA also identified the following real risks of consumer harm:
      • The loss of opportunity for consumers to put their money to better use, such as paying down debt or contributing to a TFSA, and
      • The potential for consumers to lose all their overfunded premiums if a universal life insurance policy (a complex combined insurance and investment product) is not managed properly and the policy lapses.6
    • Determining who is suitable, or unsuitable, to hold a life insurance license is a critical part of FSRA’s consumer protection mandate.
      • Given the alarming findings of FSRA’s examinations, clarifying expectations about how past and current conduct may impact an agent’s suitability to hold such a license is not only appropriate, but also necessary to protect Ontarians.
      • These findings call out for the strongest possible regulatory response by FSRA.
    • The balance of our comments will focus on the application of the proposed Guidance to MGAs (given the development of the MGA business model, which the Insurance Act (Ontario) does not explicitly contemplate).
    • B. FSRA’s Oversight Powers need to be Enhanced
      • Insurance Act (Ontario) predates the development of the current MGA business model
      • While the proposed Guidance is necessary, one cannot discount the possibility that some insurers or MGAs may challenge FSRA’s interpretation of current legislation through the courts.
        • If any such challenge succeeded, it would seriously impede FSRA’s oversight of MGAs and its ability to protect the public.
        • This would be a poor outcome for consumers because:
          • The placement of insurance by independent agents through MGAs is the prevalent insurance distribution channel in Ontario, and
          • FSRA has identified many problems regarding the way insurers delegate many functions, such as agent screening, training, and monitoring, to MGAs.
      • While the proposed Guidance is laudable and appropriate, we strongly recommend that the government of Ontario consider whether targeted amendments to the Insurance Act (Ontario) and its regulations are also necessary to ensure consumers are fully protected.
        • Specifically, we recommend the government consider amending the Insurance Act (Ontario) to:
        • Define what an MGA is and provide FSRA with specific rule-making authority to oversee MGAs,
        • Grant FSRA the power to create new categories or sub-categories of insurance licenses under the Insurance Act (Ontario) and to prescribe requirements in respect of such new categories or subcategories of licenses, and/ or
        • Grant FSRA the power to prescribe criteria for determining whether new types of businesses or business models involve activities that are subject to the Insurance Act (Ontario) and its
          regulations.
  • 8. - FINANCIAL HORIZONS - Nick Pszeniczny - [FSRA-2023-015] - 4p
    • The Guidance changes that, and proposes that MGAs in Ontario be required to be licensed with FSRA.
      • While this may not have previously been a FSRA requirement, we believe that most, if not all, MGAs operating in Ontario would already have an Agent license from FSRA.
    • In this letter, we will indicate our support for, or disagreement with, various components of the Guideline. However, we will focus most of our attention on recommending specific minimum criteria for some of the MGA suitability requirements proposed in the Guideline.
    • Financial Horizons Agrees
    • Financial Horizons Disagrees
      • Separate License
      • Deal with Public
      • Agent-Principal Relationship
    • Specific Minimum Criteria for MGA Suitability Requirements
      • Compliance Office
        • We believe that most of the risks faced by consumers and agents in the marketplace would be significantly reduced if all MGAs had adequate compliance departments. There are currently no formal guidelines for the minimum qualifications or proficiency required of an MGA’s Compliance Officer.
        • This is unlike other industries which provide detailed minimum requirements for Compliance Officers.
      • The current wording – which references sufficient “expertise and resources” and “an adequate
        compliance function” – is so ambiguous and vague that it may not cause any change in the way MGAs operate and behave.

        • We believe that smaller, less organized, MGAs pose a much greater risk to consumers and to the reputation of the industry as a whole, and the Specific Minimum Criteria may be effective in helping to mitigate that risk.
      • While we believe the above Specific Minimum Criteria are appropriate, we offer the recommendation to spur conversation and debate.
        • Our main concern is that specific minimum criteria, whatever they may be, be included in the final version of the requirements.
        • Otherwise, if the requirements are merely principled instead of prescriptive, we are concerned the requirements will be interpreted very differently by different parties, and the consumer protection goals of the Guidance will not be achieved.
  • 10. - HUB Financial - HFI - Andrew Fink - [FSRA-2023-015] - 2024 0223 - 3p
    • Agents should have the benefit of a clear outline of suitability requirements, the skills necessary and understanding of regulatory obligations to holds a licence.
      • It is HUBs position that MGAs and Insurers should not use materially different criteria in determining agent suitability than that of the Regulators who authorize and grant the agent licence.
    • In this Guidance, Managing General Agencies (“MGAs”) are defined as licensed corporate or partnership agencies, which perform activities for insurers such as recruit, screen, train, supervise or monitor agents, review applications, and functions historically performed by Insurers when they had an exclusive sales force.
      • The Guidance definition of an MGA refers to virtually all types of contracted Agencies and could apply to National Accounts, AGAs and Corporate Brokers.
      • [Bonk: Bad Apple? or no?]
    • A key difference FSRA should consider is a business-to-business relationship instead of business-to-consumer relationship.
    • FSRA indicates its future Guidance will describe Insurers obligation to maintain a system to ensure that agents acting on their behalf are compliant and, regardless of whether oversight functions have been delegated, the insurer retains its responsibility and must each take reasonable steps to ensure their individual agents comply.
      • HUB looks forward to the clarity this additional guidance may offer.
    • The life insurance industry and its products are complex and effective regulation will only come from an indepth knowledge and understanding of the landscape of all its stakeholders.
      • Compliance Systems
    • Of concern to HUB, is the consistent reference to the oversight faults of the MGA channel within insurance distribution.
      • FSRA reference to functions historically performed by Insurers, implies a potential bias in favour of Insurer Distribution, and perhaps Insurers do a better job of oversight of agents within their captive agent channels.
      • Before proposing potentially substantial changes to responsibility and regulatory requirements there should be a clear understanding of what consumer harms are occurring and how the existing regulatory regime is not sufficient to address these concerns.
        • [Bonk: What's the Problem?]
      • HUB encourages FSRA to apply the Guidance to all forms of Distribution including, but not limited to, captive agents, National Accounts, call centers, deal direct arrangements, MGAs, and online sales.
        • [Bonk: These aren't new problems, although many people don't know about them. They existed before MGAs. Depth and Breadth of problems.]
      • HUB is aware of and reviewed the various FSRA enforcement notices relating to MGAs operating with a tiered recruitment model, in which FSRA identified concerns with the suitability, oversight, and sales practices of associated agents.
        • These MGA models included a concentration of sales with one or two insurers and a single product recommendation to consumers with absence of suitability considerations.
        • It would seem reasonable that the patterns easily identified by FSRA should also have been identified by the Insurer(s) through the significant connection between with the Insurer(s) and MGA(s) and addressed those concerning practices accordingly.
        • This appears to be a shared lack of oversight between these specific MGAs and Insurer(s) and accountabilities should be equally applied.
        • [Bonk: These aren't new problems, although many people don't know about them. They existed before MGAs. Depth and Breadth of problems.]
      • HUB supports efforts to enhance market conduct oversight and would expect that any rules and/or guidance drafted would be reasonable, clearly defined and evenly applied across all Distribution channels. It should be recognized that oversight is a shared responsibility amongst all industry stakeholders and all Distribution channels would have the same oversight needs and challenges.
      • PP - Responsibilities
      • Currently, responsibilities among Insurers, MGAs, AGAs (and similar entities) are unclear and Insurer interpretations of FSRA requirements have led to inconsistent approaches and requirements, making it challenging for MGAs to maintain reasonable and consistent compliance processes. A few examples...
      • Finally, it is our observation that all channels have the same compliance challenges.
  • 11. - iA Financial Group - Renée Laflamme - [FSRA-2023-015] - 2024 0223 - 3p
    • First and foremost, we would like to express our support for and alignment with the response submitted by the Canadian Life & Health Insurance Association (CLHIA) in the context of this consultation.
      • iA currently partners with over 85 MGAs and 18 national accounts across the country. This independent distribution network includes players of all sizes. iA also owns PPI Management Inc. (“PPI”), one of the largest MGAs in Canada.
    • The proposed guidance does not go far enough
      • clarifying the roles
      • we however believe that FSRA must go further than issuing guidance.
        • In our view, the clarification that is sought will be more effective with the introduction of clear amendments to the Insurance Act.
      • While the draft guidance provides further clarity on FSRA’s approach when assessing an agent’s suitability, we remain deeply concerned that it will not lead to material changes to the current environment and will  not create a level playing field unless it is accompanied by a clear legislative framework equally applicable to all market participants.
    • The proposed guidance may lead to regulatory misalignment
      • Our experience leads us to believe that requiring carriers to take the responsibility to enforce regulator expectations through their contractual agreements opens the door to different interpretations and misalignment between them.
      • For example, each insurer has its own standards, requirements, processes and appreciation when dealing with agent suitability.
        • [Bonk: YouTube Video - Parody - ]
      • The same observation applies when a carrier delegates agent suitability functions to MGAs. Even if insurers set baseline expectations, every MGA will execute agent suitability functions differently thereby increasing the inconsistent approach referenced earlier. In a context where an MGA holds a contractual relationship with many carriers, one carrier cannot simply force an MGA to adopt and execute its own standards and requirements having no consideration for the MGA's situation.
        • As such, expecting carriers to enforce regulatory requirements through their contractual agreements with MGAs while preserving competitive business relationships has not proven to be effective.
    • The proposed guidance could be perceived as unfair for all market participants and clients
      • Regulation does not currently recognize MGAs, who are not bound by a clear framework that would positively impact their mobilization, their accountability in the distribution chain and their overall reactiveness, as a group, in a uniform way.
      • Individual, corporate and partnership agents are recognized by the regulation and, as such, MGAs need to be equally recognized in view of their actual role and responsibilities in the distribution chain. FSRA applying a distinctive “guidance” approach with respect to the obligations and the suitability of MGAs without directly regulating them as accountable participants in the distribution of life insurance puts industry participants in a difficult position while having little positive effect on consumer outcomes
      • A guidance can be an effective tool when there is a clear underlying legislative framework. The current approach may limit FSRA’s ability to take effective, direct action in regard to an MGA when a suitability concern arises with the MGA or their agents. As FSRA highlighted in its draft guidance, the suitability criteria for an MGA differs from that of an individual, corporate or partnership agent.
      • More importantly, we strongly believe the current approach significantly hinders the effectiveness of FSRA’s initiative and is ultimately not the best path to attain our common ultimate objective – the fair treatment of customers.
    • The agent-principal relationship should not be included in the guidance
      • In addition to the above comments, we want to highlight our strong concern with respect to the inclusion of FSRA’s position that the principal-agent relationship exists between agents and insurers and/or agents and MGAs.
      • Whether an agency relationship exists is a function of the application of the common law.
        • A regulatory guidance should not be used to pre-determine whether this legal test has been met (or that it is even relevant).
        • Its inclusion is prejudicial to both insurers and MGAs. In our view, this is a matter that
          should properly be left for the courts.
    • Conclusion
      • Our vast experience with various distribution networks over many years leads us to propose the following overarching recommendation:
        • direct regulation of MGAs trough legislative changes will have the most positive impact on the fair treatment of customers.
      • In the end, a clarification of the role of MGAs in legislation would put customer interest at the center of this reform. Indeed, customers will benefit the most from a clear supervisory framework that includes MGAs as full fledge market participants with direct accountabilities applied by all in a consistent manner.
  • 12. - IDC Worldsource Insurance Network Inc. - Phil Marsillo - [FSRA-2023-015] - 2024 0222 - 2p
    • We are supportive of Fair Treatment of Customers (FTC) Guidelines; taking additional steps to ensure the consumer receives the desired outcome throughout the life cycle of the insurance product, and that the products recommended, are appropriate, to meet the customers’ needs.
      • [Bonk: How are the servicing needs going to be taken care of? Very small renumeration]
    • We believe all those party to the insurance transaction should be governed by the same rules of engagement.
      • [Bonk: 1) Nobody's being responsible. 2) Law - Duty to Read. etc]
    • We agree with and appreciate what the guidance seeks to achieve, however, we have concerns with the guidance in the current form. We would recommend more clarity into each party’s separate or overlapping obligations, to mitigate uncertainty and leave less room for interpretation.
      • For example, clear accountabilities for carriers, distributors, and advisors.
    • We appreciate the need for the distributor to be aware of advisor actions that are not in the best interest of consumers, however, we believe accountability for advisors’ actions or inactions cannot rest solely on the distributors or carriers.
      • Licensees are ultimately responsible for their own conduct and their adherence to regulatory rules and obligations under the Insurance Act.
      • [Bonk: Crown Life v Casteel - Agents are suppose to be smarter, So, Companies can just lie to them?]
  • 13. -  IFB - Independent Financial Brokers of Canada - Susan Allemang - [FSRA-2023-015] - 2024 0209 - 3p
    • IFB is a voluntary, not for profit, association whose members are licensed financial professionals.
    • Education and training
      • IFB agrees that individual life insurance agents and managing general agencies (MGAs) should have the necessary skills to be licensed and have the knowledge to understand how to comply with the law, treat customers fairly and adhere to their various legal and regulatory obligations. In our view, education is an integral step to ensuring licensees meet this threshold and it begins with the LLQP.
      • The LLQP provides an important first step for prospective agents to learn the fundamentals of life insurance and educate them as to their obligations as agents. The LLQP program sets the baseline for today’s regulatory expectations, so these prospective agents understand the important role they have in protecting consumers. CISRO, which FSRA participates on, should regularly monitor the content of the LLQP so that graduating students are well-prepared for a career in life/health insurance.
        • Keeping existing licensees apprised of changing expectations and best practices is equally important.
        • The mandatory ongoing education required of licensees should have meaningful content.
        • balanced approach to CE that would require CE to be accredited and earned under various headings (e.g., product, regulations, best practices, ethics , etc.), similar to that required for mutual fund and securities registrants.
        • https://www.fsrao.ca/newsroom/what-stakeholders-had-say-about-fsras-performance
        • Lastly, insurers, MGAs, and industry stakeholders, like IFB, offer regular educational and training opportunities which can be used to reinforce regulatory expectations and appropriate standards of business conduct which will meet the licensee’s contractual obligations and licensing requirements.
          • While IFB does this on an ongoing basis, we are always pleased to work with FSRA to leverage opportunities to reach the target audience.
          • [Bonk: Explore]
    • Shared suitability obligations
      • The guidance addresses a number of points concerning insurer and MGA supervisory responsibilities. While IFB does not specifically speak for MGAs, the majority of IFB members place business through the MGA channel.
      • There has been, and continues to be, consolidation amongst MGAs that are creating larger, more complex entities.
        • In a newer trend, some MGAs have been purchased by insurance companies.
        • [Small vs Large] - these entities may face more difficulty in supervising large numbers of agents, as compared to smaller partnerships/agencies with more hands-on knowledge of their contracted agent’s business.
        • While both have advantages to the advisor and clients, a consequence of regulatory change and the cost of change may result in further consolidation whereby smaller agencies are forced out of the market by insurers or by acquisition, or by reduced financial capability to compete and attract/retain advisors with established books of business. This is a concern of ours as it threatens to reduce the accessibility of insurance to consumers, especially in smaller markets.
        • IFB agrees that all insurers and licensees should share the responsibilities to ensure customers are treated fairly and receive suitable advice. This underpins the integrity of the insurance industry.
          • We note, however, the possible market consequences which may lead to a reduction in product shelf by MGAs, in response to these responsibilities.
          • This has been a consequence of the CSA’s Know Your Product and other suitability requirements arising from the Client Focussed Reforms in the securities industry.
            • The most notable example of this is the reduction of independent products being offered at Canada’s major banks, in favour of their proprietary products.
      • Outdated legislative framework
        • While FSRA aims to work toward a more effective approach to supervision, it is hampered by legislation and regulations which do not address the changes in distribution that have become prominent in the past 40 years.
      • Harmonization
        • In recent years, several provincial jurisdictions have issued guidance or regulatory approaches intended to define the role of the MGA in their licensing regimes. Examples include the Insurance Council of B.C.1, Saskatchewan Insurance Council2 and the New Brunswick Financial and Consumer Services Commission3.
        • In addition, the CISRO/CCIR Guidance Conduct of Insurance Business and Fair Treatment of Customers (adopted by FSRA) includes MGAs in its definition of an intermediary.
        • Adapting to these can be challenging for licensees. We encourage FSRA to use additional communication vehicles, such as webinars, to reach the intended target audience, and utilize its industry partners, like IFB, to assist in this regard.
  • 14. PPI Management Inc. - Cathy Hiscott - [FSRA-2023-015] - 2024 0223 - 4p
    • We specifically support holding MGAs to a higher standard given our increasingly significant role in the distribution of insurance products in the current marketplace.
    • Amendments to the Insurance Act and Regulations to complement and underpin the Guidance are required.
      • entity suitability and oversight of agent suitability
        • Indeed, the legislative framework should be updated to clearly set out the regulatory expectations and specific standards that apply to all intermediaries as well as carriers.
      • While principle-based guidance can be helpful in some contexts to understand how a law or regulation may be applied, a guidance is not an enforceable law.
      • In this regard, we believe that there are certain minimum standards for both MGAs and agents that should be incorporated as part of an updated legislative framework:
        1. Requiring all MGAs, regardless of size, to have an appropriate compliance system in place and minimum relevant academic and ongoing education requirements for the compliance professionals charged with developing, administering, and monitoring that system.
        2. Requiring all MGAs, regardless of size, to have minimum required levels of E&O Insurance and cyber security insurance.
        3. Requiring all agents to complete a financial needs analysis and a “reason why” letter at the point of sale.  [Bonk: ?]
        4. Clarifying the difference between corporate or partnership agent firms and MGAs and the obligations of each.
      • In our view, each of these standards foster better consumer outcomes and should form part of updated statutory obligations of agents and MGAs.
    • Carrier/MGA contracts are not an appropriate nor effective way to ensure consistency in protecting the public from negative consumer outcomes.
    • The principal-agent relationship falls within the jurisdiction of the judiciary and not FSRA as a regulator.
      • The principal-agent relationship commentary in the draft Guidance is both out of scope for guidance and out of jurisdiction for FSRA. This is an issue that should be left to the courts to address.
    • License suspension and revocation should be addressed in the Regulations, not Guidance.
      • suitability vs conditions of a license
      • Revoking or suspending a license is a very serious matter with sweeping catastrophic ramifications for MGAs, their employees, and the advisors they serve, including the clients of those advisors. We recognize that FSRA has broad discretion to interpret suitability.
      • However, we remain concerned that the Proposed Guidance has introduced elements that are not properly factors related to suitability but more in the nature of conditions of a license.
      • Moreover, the power to revoke a license should be based on prescribed and specific, factors not ones that are broad and principle based.
      • The courts have repeatedly said that the evidence to revoke or suspend a license must be “clear, convincing, and cogent.”
      • The courts have also recognized that the public interest is not the only factor at issue for a regulator when it is considering the potential revocation or suspension of a license because there are severe financial consequences if an agent or an MGA loses their license.
      • Given this importance, the factors related to suitability - particularly when they are referenced to revoke or suspend a license - should be prescribed as they always have been in the Agents Regulation.
      • Suitability should not be a moving target that is subject to regular change in a guidance.
        • Issues of this magnitude should again be addressed through the vigorous legislative debate process to ensure some measure of predictability for all stakeholders in the industry going forward.
        • [Bonk: How does this System Work?]
    • Conclusion
      • Clear and direct regulation of intermediaries is necessary in order to adequately address the current state of insurance distribution in Ontario.
      • An updated legislative framework will provide consistent understanding and enforceability of the accountabilities of all industry stakeholders which will help to better achieve the goal of Fair Treatment of Customers
  • 15. - Primerica Financial Services - John A. Adams - [FSRA-2023-015] - 2024 0226 - 3p
    • [Intro]
    • We recommend that FSRA further delineate agent suitability and supervision responsibilities as well as the controls required by insurers versus MGAs.
    • To ensure that MGAs can be tasked with the appropriate responsibilities, a regulatory and possibly legislative change may be required, and this should be examined in the context of the goals of the Guidance.
      • We look forward to working with you and the industry on achieving these goals, while minimizing unintended consequences of any new or revised regulatory regime.
    • serving the Canadian public since 1986
    • ⇒  Our representatives guide their clients at life's critical points, helping them avoid common pitfalls to gaining financial independence:
      • higher cost and lower face value insurance that does not protect adequately, starting to save too late, not saving enough and neglecting tax advantaged savings opportunities, to name a few.
    • our digital FNA (Financial Needs Assessment), which provides them with a snapshot of their financial situation and a road map to achieve their goals.
    • We have an exclusive sales force of representatives, which allows us to put supervision, monitoring, controls, and restrictions in place based on trends and risks we identify.
    • FSRA’s Role as a Principle’s Based Regulator
      • FSRA was established as a principles-based regulator and that model has served consumers and its regulated stakeholders well.
      • This model allows FSRA to remain agile in addressing consumer harm by staying up to speed with industry developments, new practices and products.
      • In addition to the life insurance agent and MGA licensing suitability guidance, we do believe that the government should establish a regulatory framework specific to MGAs for the protection of consumers with respect to matters that cannot be effectively supervised by insurers.
    • Establish A Regulatory Framework That Regulates the Activities and Obligations of MGAs
      • While distribution models have evolved, regulations have not been updated to address the change, creating gaps in the current framework, most notably with MGAs.
      • Primerica understands from FSRA’s January 17, 2024 webinar that FSRA plans to release a proposed rule for Life and Health MGAs, and we support this initiative.
        • There is immense variability amongst MGA market conduct practices, which should be standardized through a rule or regulation to ensure fair treatment of customers.
          • If this requires a legislative change, we are supportive of such a legislative amendment to recognize the role of MGA’s in distributing life insurance products.
        • Life Insurance Companies v MGAs
    • Life Insurers Require More Oversight of MGA Agents
      •