Ontario’s financial services regulator has begun consulting on a proposed rule for managing general agents (MGAs) — a growing distribution channel with a new licensing requirement.
The new proposed rule aims to better protect consumers and strengthen oversight of MGAs, the Financial Services Regulatory Authority of Ontario (FSRA) said in a release on Tuesday.
“It will also help ensure consumers are treated fairly and consistently, and they are receiving advice from well-trained and properly supervised agents,” the release said.
In its fall economic statement in October, Ontario’s government proposed creating a new licensing regime for the insurance industry to enhance consumer protection and clarify the roles and responsibilities of insurers, distributors and agents.
Earlier in 2024, the province’s Finance Ministry had consulted on licensing standards for MGAs following evidence of “unfair consumer treatment” arising from the poor conduct of some MGAs and their agents, and some deficiencies in insurers’ oversight of MGAs.
For example, from May 2022 to April 2023, FSRA reviewed dozens of life agents contracted with firms that tie compensation to agent recruitment. That model creates the potential to “focus on recruiting to a greater extent than agent suitability and customer needs analysis,” FSRA said in a 2023 report detailing its review.
The regulator also found that the majority of the reviewed life agents’ insurance policy sales in 2020 and 2021 were universal life. In many cases, the sales of that product, which FSRA has described as niche and complex, were unsuitable.
FSRA said in the release on Tuesday that its proposed rule builds on amendments to the Insurance Act creating a separate licensing class for MGAs in the province and enhances accountability for MGAs and insurers by clarifying their roles and responsibilities in agent supervision.
For example, MGAs that train life agents are responsible for ensuring agents understand “how to be clear, accurate and not misleading with respect to the solicitation and negotiation of, and the provision of advice with respect to, insurance,” the proposal says.
FSRA’s rule also introduces requirements for life agents who work with MGAs. For example, life agents must “avoid or properly manage” conflicts arising when recruiting other agents for an MGA, the proposal says.
The consultation runs to March 31, and FSRA said in a notice of the rule that it will use feedback to draft potential guidance.