Insurance companies are urging managing general agencies (MGAs) to more closely monitor the advisors they contract with, in order to ensure bad apples in the industry aren’t slipping through the cracks.
At the Canadian Association of Independent Life Brokerage Agencies (CAILBA) annual meeting in Toronto, a panel of insurance executives explored the recent regulatory changes in the MGA channel. They acknowledged that the regulatory recommendations from the Canadian Council of Insurance Regulators (CCIR) are resulting in a greater compliance burden for industry players.
“Everybody knows that there will be increased compliance,” said Michael Dawe, senior vice president, individual, at Equitable Life of Canada. But he added that the regulatory measures are important, in order to ensure all industry players are acting in the best interest of their clients.
“This is just a process that we’re going through to protect the public,” Dawe said. “We’ve got to be proactive as an industry.”
The panelists said it’s particularly important that advisors are being diligently screened and closely monitored. Although the majority of advisors are meeting their compliance responsibilities and acting in the interest of their clients, the executives said MGAs must watch for inappropriate sales practices and client complaints.
Terri DiFlorio, president of Hub Financial Inc., said MGAs such as Hub are already conducting much more onerous screening and monitoring than they did in the past.
“We review business today in many ways that we would never even have imagined three years ago,” she said.
Although it’s rare, DiFlorio said these monitoring and screening efforts occasionally reveal an advisor who’s engaging in misconduct.
“The great majority of advisors love the business, they believe in the product they offer, and they’re doing an exceptional job,” she said. “Once in a while, we find something else, and quite honestly, that makes all of our efforts well worthwhile.”
The panelists acknowledged that as MGAs continue to grow and consolidate, these monitoring activities will become more challenging over time. Some of the large MGAs contract with thousands of advisors across the country, making it difficult for executives to know each one personally.
Rick Forchuk, special advisor, retail insurance distribution with Empire Life, said MGAs should consider conducting annual reviews with advisors, in order to have an organized way of keeping tabs on each advisor’s compliance and business practices.
“Companies do regular reviews with MGAs; advisors allegedly do annual reviews with clients,” Forchuk said. “I think MGAs should have some kind of process, if they don’t already, for doing an annual review with their advisors.”
The panelists said it’s also critical for MGAs and advisors to document all of their processes appropriately, in order to be able demonstrate their compliance to the insurers and regulators.
“Name who’s doing what,” said Phil Marsillo, senior vice president of distribution at Canada Life. “Because when you’re going to get audited by not only the insurance companies, but the regulators, you want to be prepared.”
Ultimately, it’s highly important for the industry to comply with all of the CCIR’s recommendations, Forchuk said. He suspects that if the industry fails to meet the principles-based regulatory guidelines that are currently in place, it could be faced with a much stricter set of rules.
“They’re giving us an opportunity through reference documents and guidelines to police ourselves, regulate ourselves,” Forchuk said. “If we should not do these things, then they’ll do it for us. And if they do it for us, it’s going to be far more onerous than anything we do ourselves.”