Reviews of life agents in Ontario over the past couple of years have uncovered a “high incidence” of failure to adhere to best business practices, a regulatory report released on Thursday says.
Between 2022 and 2024, the Financial Services Regulatory Authority of Ontario (FSRA) reviewed 319 life agents, with the cases arising from the misconduct reports received from insurers and managing general agents (MGAs), and from the regulator’s supervision programs.
“While the 319 agents we reviewed don’t represent the entire sector, some of their behaviours raise consumer protection concerns,” Huston Loke, executive vice-president of market conduct with FSRA, said in a release. “We strongly encourage insurers to review their compliance systems and ensure their agents are selling insurance products that meet their clients’ needs.”
FSRA supervises more than 60,000 life agents in the province.
The misconduct included providing false or misleading information to insurers and consumers, coercion, and failing to adhere to best practices, such as keeping contemporaneous notes (the top best-practice issue identified).
About 35% of the reviews (112 life agents) resulted in regulatory action: in 57 cases, FSRA issued business practice letters, and in 55 cases, the regulator escalated the matters for further investigation. Only 15 cases were closed with no concerns.
“FSRA has taken action by revoking or suspending some life agent licences and imposing administrative monetary penalties,” the report says. “FSRA will continue to take action as necessary.”
The report reminds insurers that they’re responsible for the “appropriate conduct of all life agents representing them, including life agents contracted with their distribution partners.”
The report also shows that, since FSRA launched an online portal in March 2023 to facilitate the reporting of potentially unsuitable life agents, the number of misconduct reports received has increased substantially — by 102% in 2022–23 and by 17% in 2023–24. In these years, misconduct reports totalled 123 and 144, respectively.
In comparison, in the three years before the online portal launched, the number of misconduct reports received grew at a 7% to 8% rate, the report says, ranging from 53 to 61.
However, such stats, as well as the number of escalated misconduct reports, don’t necessarily represent an increase in life agent misconduct, the report says. For example, the regulator sometimes receives multiple reports about one life agent.
Over the past two years, common types of misconduct cited in the misconduct reports related to unethical behaviour (e.g., acting without explicit client instructions) and trustworthiness.
The report concludes that “the outcomes of FSRA’s 2022–23 and 2023–24 life agent supervision suggest there is more work for industry to do. FSRA urges life agents to commit to needs-based sales practices to improve their overall business practices.”
Last autumn, the regulator said its 2022–23 review of 130 life agents at multi-level-marketing MGAs resulted in enforcement for 65 life agents. In addition, that review uncovered the sale of unsuitable universal life policies.