FSRA proposes guidance on life agent fitness

Amid concerns about the conduct of life agents, the Financial Services Regulatory Authority of Ontario (FSRA) is proposing guidance to make sure they’re worthy of licensing.

FSRA issued draft guidance intended to ensure that agents and managing general agencies (MGAs) are equipped to comply with regulatory requirements, treat customers fairly, and meet their legal obligations. It also reiterates life insurers’ oversight responsibilities.

Among other things, the guidance is intended to serve as a reference for agents, prospective agents, and MGAs “to understand how past and current conduct may affect their suitability to hold a life insurance agent licence,” the regulator noted.

It’s also designed to serve as a guide for insurers and MGAs in screening agents and applicants, to assess suitability for licensing, and to set expectations for insurers’ oversight of agent compliance.

The regulator said the guidance is part of a larger plan that aims to improve conduct and customer treatment by the life insurance sector in the wake of supervisory reviews that have found an array of weaknesses.

For instance, FSRA reported that its supervisory reviews have found “gaps and a lack of clarity” relating to the roles and responsibilities shared among insurers, MGAs and independent agents.

“This includes a lack of agent training and supervision, unsuitable product sales, and agent recruitment and compensation models that may lead to the unfair treatment of customers,” it noted.

These weaknesses are manifesting as sales practices that, FSRA found, create a “substantial risk of consumer harm.”

Additionally, a review of MGA agents found “unacceptable levels” of non-compliance, with half of the agents it reviewed being found to have contravened insurance law — including poor disclosure, poor sales practices involving complex products, and failing to complete required continuing education.

To address these findings, along with the proposed new guidance, the regulator is also stepping up supervision and enforcement, stiffening rules for MGAs and other intermediaries, beefing up whistleblower protections, and undertaking customer education, it said.

The deadline for feedback on the draft guidance is Feb. 9, 2024.