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2023 1121 – FSRA – Proposed Guidance on Life Insurance Agent & MGA Licensing Suitability

• 2023 1121 – FSRA – [2023-015] – Proposed guidance on Life Insurance Agent & MGA Licensing Suitability  —  [BonkNote]  —  [link]  —  34p
  • 2024 0209 – FSRA – [2023-015] – Comments – Consultation for Proposed Guidance on Life Insurance Agent & MGA Licensing Suitability  —  [BonkNote]  —  [link]
    • Open Date – November 21, 2023
    • Comment Due Date – February 9, 2024

• 2023 1121 – FSRA – [2023-015] – Proposed Guidance on Life Insurance Agent & MGA Licensing Suitability – Project  — [BonkNote]
• 2023 1121 – FSRA – [2023-015] – Consultation for Proposed Guidance on Life Insurance Agent & MGA Licensing Suitability – BonkNote Comment  —  [BonkNote] – Private

• Contents
• • Purpose………………………………………………………. 2
  • Scope………………………………………………………….. 3
  • Rationale and background …………………….. 5
• Interpretation …………………………………………… 7
  • FSRA has broad authority to determine matters that are relevant to whether an agent, including an MGA, is suitable to be licensed under s. 392.4(1) of the Act……………………… 7
  • FSRA’s assessment of suitability is also guided by its statutory mandate …………………………………. 8
  • Misconduct impacts life agent and applicant suitability ……………. 9
  • Key factors in FSRA’s framework for assessing the impact of conduct and activities on suitability ……………………………………11
  • False statements and material omissions ……………………… 12
  • Suitability – Additional considerations for corporate and partnership agents ……………………… 13
  • Suitability – Additional considerations for Managing General Agencies (“MGAs”) …………………….. 14
  • Insurers – Agent suitability responsibilities ………………………… 18
  • Life agents may be held to be in a principal – Agent relationship ………………………………………….. 20
• Approach ……………………………………. 22
  • Principles ……………………………………. 22
  • Processes and practices ………….. 22
• Effective date and future review ………25
• About this Guidance  ………………………26
• References …………………………………………26
• Appendix A ……………………………………….. 27
• Appendix B ……………………………………….. 29

• (p4) – In this Guidance, the term MGA refers to a corporate or partnership life insurance agency that deals with the public and engages in, or is required by contract to perform, any of the following activities on behalf of or in support of an insurer:
  • Soliciting or submitting applications for insurance on behalf of agents who are associated with or under contract to the MGA, or affiliated with or under contract with the insurer on whose behalf the MGA is soliciting or submitting applications from life agents for insurance.
  • Training agents who are affiliated with or under contract to the MGA or the insurer on whose behalf the MGA is providing training, or ensuring such agents are trained, with respect to insurance.
  • Any functions historically performed by insurers when they had their own direct agent team as a dedicated/exclusive sales force.
  • Other conduct, obligations, duties or activities which results in or could reasonably be expected to result in the activities listed immediately above.

• (p5) – Rationale and background – Licensing suitability under the Insurance Act
  • Suitability is an ongoing requirement under the Act. FSRA assesses suitability when a new application for licensing is submitted, when a licence renewal or reinstatement is sought, and at any time FSRA deems appropriate.^[5]
  • 5 S. 7(1) of O. Reg. 347/04 provides that an application for the renewal of a licence must be made in the same manner as for a licence in the first instance. S. 8(a)-(d) of O. Reg. 347/04 provides that FSRA may suspend or revoke a licence on any grounds on which an application for a licence may be refused, if after due investigation andhearing, it appears to FSRA that the licensee:
    • (d) has demonstrated incompetence or untrustworthiness to transact the insurance agency business for which the licence has been granted

• (p8) – FSRA’s assessment of suitability is also guided by its statutory mandate
  • FSRA’s assessment of suitability is informed by its statutory mandate, including to:
    • protect the rights and interests of consumers
    • contribute to public confidence in the insurance sector
    • promote high standards of business conduct
    • deter deceptive or fraudulent conduct, practices and activities
• (p9-10) – Misconduct impacts life agent and applicant suitability
  • In assessing an applicant’s or agent’s/MGA’s, suitability, FSRA will consider whether the applicant’s or agent’s, including an MGA’s, conduct or activities, past or present, may make them unsuitable to be licensed.
  • Conduct or activities that create a risk that an agent, including an MGA, may fail to comply with the law or to treat customers fairly, or act contrary to legal and regulatory obligations, may demonstrate that an applicant or agent, including an MGA, is not suitable for licensing.
  • The following are examples of conduct and circumstances that may make an applicant or agent, including an MGA, unsuitable. They include, without limitation:
    • Failing to diligently perform any duty or activity that an agent, including an MGA, undertakes or agrees to perform on behalf of an insurer or another agent, or in support of an insurer’s obligations under the Act, under FSRA or multi-jurisdictional Guidance or under regulations or rules made under the Act, including obligations related to the recruitment, training or supervision of agents, treating customers fairly (including disclosures, suitability and after-sales servicing) and practices related to the underwriting, negotiation, contracting for and administration of insurance contracts.
    •  Any other behaviour relevant for the purposes of assessing suitability that engages the factors set out in the Agents Regulation.

• (p15) – The insurance products they and/or their individual agents distribute are sold in compliance with the Act, regulations, and FSRA rules and Guidance, given the unique elements of their business.
• (p16) – Whether the MGAs’ control and compliance functions are designed with regard to the size, complexity, operations, and risk profile associated with the MGA’s business. [26]
  • For example, an MGA that focuses on recruitment of new individual life agents and candidates for licensing may require additional oversight and safeguards. 
• (p16-17) – Improper practices impact the suitability of MGAs
  • Practices that can or do contravene the Act, regulations, rules, or applicable FSRA or multijurisdictional Guidance, or are likely to lead individual agents associated with the MGA to do so, demonstrate that an MGA is not suitable for licensing.
  • Examples of such practices include, without limitation:
    • Using deceptive promotional material or tactics, or failing to take appropriate action where life agents do so.
    • Disseminating deceptive or misleading information to life agents or others.
    • Maintaining insufficient controls against unlicensed sales of insurance.
    • Facilitating or acquiescing to unethical activity in the licensing, sales or contract administration processes.
    • Offering, acquiescing to, or facilitating sales incentives that encourage sales that are not in accordance with regulatory requirements or that create conflicts of interest that are not adequately addressed through disclosure and other practices to mitigate and address such conflict (such as ensuring appropriate independent advice)
  • (p18) – Insurers – Agent suitability responsibilities
    • As such, insurers are required to screen agents, including MGAs, who act on their behalf and to monitor them on an ongoing basis. Insurers are accountable for these obligations but have flexibility in deciding how they comply with the outcomes-focused requirements outlined in the Interpretation section of this Guidance.
    • To determine whether the insurers are adhering to their obligations, FSRA will assess them against the regulatory outcomes (e.g. the need to properly screen, train and oversee agents, including MGAs, to help ensure the fair treatment of consumers) rather than prescribing a particular path to achieve compliance (e.g. an insurer may directly screen, train and oversee agents or may, provided it has a reasonable system to ensure its reliance is reasonable, rely on MGAs or others to assist with one or more of those obligations).

• (p20) – Life agents may be held to be in a principal – Agent relationship
  • Third parties such as FSRA and consumers may be entitled to rely on the law of agency (for example, under the doctrine of apparent authority) when an insurer and licensed agent deliver products and services collaboratively.
• (p21) – An Insurer or MGA may be held responsible for the actions of an agent by virtue of FSRA’s UDAP Rule
  • Where there is a significant connection between the creation or enhancement of risk and the conduct authorized by the insurer or MGA, FSRA may, based on the specific factual circumstances, consider the insurer or the MGA, as is applicable, responsible for consumer harm which has been incurred or is likely to occur.
  • FSRA interprets these requirements collectively to mean that where an insurer reasonably knows or should know that an agent, including an MGA, is not suitable to carry on business as an agent and fails to take action, the insurer will be responsible for the noncompliance of the agent, particularly if that non-compliance results in, or is likely to cause, consumer harm.^[37]
    • ^[37] This is because that where the non-compliance with the Act, regulations, FSRA rules and the agent’s license is reasonably foreseeable to the insurer, it is FSRA’s view that the insurer, as the principal on whose behalf the agent is acting, should be responsible for the risk to consumers based on the requirements of O. Reg. 347/04.

• (p27) – Appendix A – Suitability concerns – The following are examples of conduct or circumstances that may impact suitability.
  • FSRA will review such concerns to determine the impact on suitability following the assessment factors identified in the Interpretation section and in Appendix B. 
  • [Bonk: Missing – 
• (p29) – Appendix B – Key factors in FSRA’s framework for assessing the impact of conduct and activities on suitability

• 2020 1222 – FSRA – Fair Treatment of Customers in Insurance, Identifier: No. GR0008APP – 5p
  • (p1) – This Approach confirms that the Financial Services Regulatory Authority of Ontario (FSRA) will use Guidance: Conduct of Insurance Business and Fair Treatment of Customers (Guidance), adopted jointly by the Canadian Council of Insurance Regulators and the Canadian Insurance Services Regulatory Organizations on September 27, 2018, to supervise the conduct of insurers, and other entities FSRA regulates under the Insurance Act (Ontario), with respect to the fair treatment of customers.
  • (p1) – Superintendent’s Guideline No. 03/18: Treating Financial Services Consumers Fairly, issued by the FSRA’s predecessor agency the Financial Services Commission of Ontario (FSCO), remains in place for the supervision of conduct in the mortgage brokering, loan and trust, and credit union and caisse populaire sectors.
  • (p2) – Rationale and Context
    • The Guidance is based on Insurance Core Principle 19, Conduct of Business (ICP 19), set by the International Association of Insurance Supervisors.[1] ICP 19 prescribes the elements that must be in place if insurers and intermediaries are to be deemed as treating their customers fairly, from before an insurance contract is entered into and through to the point at which all obligations under that contract have been met. 
    • (p3) – FSRA’s market conduct reviews of insurers continue to focus on the alignment of business functions with fair treatment of customers principles. In these, FSRA assesses insurers’:
      • corporate governance
      • agent training and outsourcing arrangements
      • incentives and remuneration
      • product marketing and advertising
      • point-of-sale information
      • claims handling
      • complaint handling and dispute settlement
  • (p4) – CCIR/CISRO Fair Treatment of Customers Working Group – ccir-ccrra.org/FairTreatmentofCustomersWorkingGroup

• Canadian Insurance Services Regulatory Organizations (CISRO) Principles of Conduct for Insurance Intermediaries – 3p
  • (p1) – The Principles are intended to supplement, complement and build upon the intermediary elements in the
    • 2018 – Guidance on Conduct of Insurance Business and Fair Treatment of Customers (FTC), issued by CISRO and the Canadian Council of Insurance Regulators (CCIR). – 28p
    • The Principles also align with Insurance Core Principles (ICP) of the International Association of Insurance Supervisors (IAIS).¹
      • ¹ International Association of Insurance Supervisors. Insurance Core Principles, ICP 18 and ICP 19, updated November 2019. https://www.iaisweb.org/page/supervisory-material/icp-on-line-tool
  • (p1) – The Principles reinforce the fair treatment of Customers throughout the life cycle of the insurance product as a core component of the intermediary business culture. This includes conducting business in an honest and transparent manner. Expectations for the conduct of insurance business may differ depending on the nature of the relationship to the Customer, the type of insurance provided, and the distribution method. Intermediaries with oversight responsibilities must take appropriate measures to ensure that their employees and representatives meet high standards of ethics and integrity.²
    • ² The Insurer is responsible for fair treatment of Customers throughout the life cycle of the insurance product, as it is the Insurer that is the ultimate risk carrier. The Insurer’s ultimate responsibility does not absolve Intermediaries of their own responsibilities for which they are accountable.
  • (p2) – 4. Advice: When providing advice to or for a Customer, Intermediaries are expected to seek appropriate information from the Customer in order to understand and identify their unique needs. Intermediaries are expected to provide objective, accurate and thorough advice that enables the Customer to make an informed decision. Advice is expected to be suitable for the needs of the Customer based on the Customer’s disclosed circumstances.
  • (p2) – 5. Disclosure: Intermediaries are expected to provide Customers with objective, appropriate, relevant, timely and accurate information and explanations so that they can make informed decisions. Intermediaries are expected to:
    • Properly disclose the information to all necessary parties, including the insurer; and
    • Disclose information and explanations in a manner that is clear and understandable for Customers, regardless of the distribution model or medium used.
  • (p2) – 6. Product and Service Promotion: Intermediaries are expected to ensure that products and services are promoted in a clear and fair manner. Regardless of the distribution model or medium used, Intermediaries are expected to ensure that promotions are not misleading, and are easy to understand. Product promotions are expected to disclose all necessary and appropriate information.
  • (p2) – 7. Claims, Complaints Handling, and Dispute Resolution: Intermediaries are expected to handle or cooperate in the handling of claims, complaints and disputes in a timely and fair manner.
  • (p3) – 9. Competence: Intermediaries are expected to maintain an appropriate level of professional knowledge, and should stay current through continuing education to ensure the fair treatment of Customers. Where applicable, continuing education requirements must be fulfilled. Intermediaries are expected to not misrepresent their level of competence or conduct business beyond their level of professional knowledge and experience, and duties must match training/education.
  • (p3) – 10. Oversight: Intermediaries with contractual or regulatory oversight obligations are also responsible for the conduct of any employee or third party involved in the marketing, distribution or servicing of an insurance product. Intermediaries are expected to have tools at their disposal such as policies and procedures, training and control mechanisms to ensure the fair treatment of Customers is achieved in relation to their oversight obligations.