Certain MGAs pay multiple life agents for a single sale, FSRA says

This article was updated on Oct. 12 to include comments from Experior.

A review of managing general agents (MGAs) has found that some life insurance agents have been paid for sales made by agents they recruited, the Financial Services Regulatory Authority of Ontario (FSRA) says.

As a result of concerns found in the review, FSRA announced Wednesday it will release draft interpretation guidance for public consultation this fall and hold consultations in 2023 on a draft proposal to expand MGA regulation.

From December 2021 to June 2022, FSRA and the Canadian Council of Insurance Regulators (CCIR) conducted a joint review of the individual life and health insurance business of three MGAs: Guelph, Ont.-based Experior Financial Group Inc., Calgary-based Greatway Financial Inc. and Toronto-based World Financial Group Insurance Agency of Canada Inc. 

The regulators alleged that the three MGAs actively encourage agents to recruit new individuals and pay agents not only for their own sales, but also for those of new people they recruit — resulting in MGAs paying several layers of agents for one insurance sale.

This type of multi-level marketing “does not appear to be a standard practice” with life and health MGAs, FSRA said.

Experior CEO Jamie Prickett disagreed, arguing it is more or less standard in the industry for agents to be compensated not only on their own insurance sales but also on sales made by people they recruit.

“Greatway has been and remains committed to ensuring the best interests of the public and the fair treatment of customers,” said Ray Burgher, chief compliance officer with Greatway Financial, in an emailed statement. “This is a part of our business and will remain so.”

Advisor’s Edge requested comment from World Financial, but did not hear back before press time.

“Person-to-person recruiting appeared to be the most used recruiting method amongst all three MGAs,” the report said, adding that one MGA recommended a client prospect list of at least “100 names to start.”

The review also found the MGAs had a “high proportion” of newly sponsored agents and that a large proportion of life and health insurance gross income at most of the MGAs came from permanent life policies.

The average agent in Canada working with Experior has eight years of experience licensed and working in life insurance, Prickett said. In Ontario, only 18% of Experior’s agents have less than two years of experience.

Only one-third of Experior’s life and health gross income last year was from permanent insurance, according to the firm.

Agents selling “complex” coverages, such as universal life, should be trained to ensure such products are sold based on client need, the report said.

The report added that the three MGAs had a combined total of about 11,000 agents in Ontario.

FSRA said it “will consider appropriate regulatory action” and will initiate a review of insurers (beginning with ivari and Industrial Alliance and Financial Services Inc.) that have contracts with the three MGAs.

“The observations of the review, combined with the rapid growth of these MGAs and newly sponsored agents in Ontario, point to the potential for consumers to be harmed,” said Huston Loke, executive vice-president of market conduct with FSRA, in a release.