What happens if FSRA finds a life agent unsuitable

Amid a consultation in Ontario about the licensing suitability of life agents and managing general agencies (MGAs), regulators answered questions about misconduct and the rejection of licensing applications during a webinar on Wednesday.

As stated in the proposed guidance from the Financial Services Regulatory Authority of Ontario (FSRA) and outlined during its webinar, examples of misconduct that may make a life agent, licensing applicant or MGA unsuitable include criminal records; lawsuits or regulatory enforcement actions; insolvencies and bankruptcies; and false statements and material omissions, among other things.

Jelena Pejic, director of licensing with FSRA, said during the webinar that such conduct can come to the regulator’s attention during the licensing process, which includes questions about such matters that must be answered “in full.”

In response to questions about bankruptcy in particular, “FSRA is looking to understand” any past insolvencies or bankruptcies, she said. “That includes ones where they’ve been fully discharged, or consumer proposals that have been fully performed.”

FSRA also wants to know about insolvency matters that are ongoing — for example, “where somebody has filed for bankruptcy and is going through the motions of that process,” Pejic said.

Disclosing information about bankruptcies and insolvencies on the licensing application form doesn’t necessarily mean the application will be refused, she said. Rather, “what it means is FSRA will be able to adequately assess your suitability to be licensed and assess any risks tied to that suitability and resolve those appropriately.”

The guidance includes several key factors for assessing misconduct and suitability, such as repetitiveness versus a pattern of reformed behaviour.

When asked about next steps if agents are deemed unsuitable, the regulator first noted that, during the application process, the submitted information is reviewed and assessed, which includes gathering more information as required.

After this review, if FSRA deems an agent or applicant unsuitable, the regulator would be “heading towards refusing their application,” Pejic said, and “there’s a number of different avenues.”

For example, FSRA may offer the applicant an opportunity to withdraw their application “prior to FSRA taking any formal steps against the application,” she said.

In other cases, FSRA may refuse the application, first issuing a notice of proposal about the refusal and delivering it to the applicant, who can subsequently request a hearing to appeal the refusal.

When the regulator was asked if the guidance differentiates between sponsored and non-sponsored agents, Pejic said it doesn’t: “The process we use to assess the suitability of an agent will be the same whether the agent is sponsored or not.”

The guidance also reiterates life insurers’ oversight responsibilities. In response to a question about repercussions for insurers who sponsor applicants who may be unsuitable, Pejic said FSRA wants insurers to have processes to screen and monitor life agents.

In cases where the insurer sponsored an agent found to be unsuitable, FSRA will copy the insurer on communications with the licensee, she said. Further, “What FSRA will be looking for is a dialogue with that insurer to understand what steps they’ve taken to screen and certify that that agent is suitable,” she said, and those discussions will be elaborated on as needed.

The regulator was also asked why MGAs are identified in guidance for the first time in Ontario, as opposed to the Insurance Act. The regulator cited transparency about licensing requirements as well as a potential new rule for MGAs.

“We’re looking to expand and strengthen the regulatory framework as it relates to MGAs,” said Tim Miflin, senior manager, insurance policy, with FSRA. “Further down the road,” FSRA will consult on a potential new rule aimed at MGAs, he said.

The consultation on the proposed guidance runs to Feb. 9.