As Canadian insurance regulators move to upgrade the licensing program for life insurance agents, some insurance industry players are warning that the changes could lead to fewer new agents. That may make the already difficult job of attracting young talent even more challenging.
The Canadian Insurance Services Regulatory Organizations (CISRO) is in the process of updating the life licence qualification program (LLQP).The goal is to harmonize the program across the country and refresh the curriculum.
“We hadn’t done a major review in some time,” says Ron Fullan, chairman of CISRO. “The major thing is just to make sure the program stays as a high-quality program.”
The changes, which take effect in January 2016, will create a new, modular exam that will require candidates to demonstrate that they are proficient in each area of the insurance industry. Currently, a broader exam format is used in most jurisdictions.
Costs will also rise, with increased fees for LLQP course providers and candidates. The reforms also will introduce a standardized set of course materials developed under the direction of the regulators. The materials currently in use are developed by individual course providers from the industry, and vary from provider to provider.
“It’s going to make it more difficult and more expensive for otherwise qualified agents to enter into the marketplace,” says Laura Dawson, president of Dawson Strategic in Ottawa. Her firm was commissioned by Mississauga, Ont.-based Primerica Life Insurance Co. of Canada to produce a research report on the proposed changes to the licensing system.
Specifically, Dawson says, it will be more difficult for candidates to pass the new modular exam. Although the exam content will remain largely unchanged, the new format will divide it into four sections: life insurance; accident and sickness insurance; segregated funds and annuities; and ethics and professional practice. Candidates will need to earn a passing grade on each individual section in order to pass the exam.
Although Quebec already has a modular exam in place, other jurisdictions currently require candidates to earn a passing grade on a single, comprehensive exam.
“It’s not that the exam questions are going to be any harder, really; it’s this modular format [that is different],” Dawson says. “You or I will do better on an exam for which we have to answer 100 questions and get a passing grade of 70%, than if we have to do five exams of 20 questions and get 70% on each one of those.”
The result will be fewer applicants getting their licence, says Robert Gardias, president and CEO of Toronto-based Oliver’s Publishing Inc., an LLQP course provider: “There is general agreement that this will be a tougher examination process. When you add that to increased costs, there’s a mathematical certainty that you’ll have fewer candidates. The only question is: how many fewer?”
The prospect of fewer new agents is particularly concerning, given that a significant proportion of existing advisors are approaching the age of retirement. In addition, according to Dawson, research shows that many Canadians are underinsured.
“The level of life insurance coverage is directly correlated to the number of agents in the marketplace,” she says. “We think that making the testing unnecessarily onerous is just going to make the problem worse.”
Amid these realities, insurance companies are urging the regulators to avoid making the exam more difficult than it is currently.
“We are working with regulators to make sure there are no [additional] barriers to entry,” says Rob Popazzi, assistant vice president, sales force growth and development, with Toronto-based Sun Life Financial Inc., “that there is no additional rigour for candidates, and that we can continue to bring in new advisors.”
It’s important to strike a careful balance between ensuring candidates are sufficiently knowledgeable without making the examination prohibitively difficult to pass, says Mike Cunneen, senior vice president, distribution, London Life Insurance Co., in London, Ont.: “We would certainly caution against making it too challenging. But I think it has to be sufficiently challenging for entry-level candidates to ensure they are able to provide advice.”
The modular exam will enhance the protection of consumers, Fullan says, by ensuring that agents are knowledgeable on each type of product they sell. He adds that the new exam format also will benefit applicants, as those who are unsuccessful on one module will need only to rewrite that section of the exam rather than the entire exam.
The higher cost of the program also raises concerns for some industry players. CISRO is introducing a new, one-time fee for future LLQP candidates to cover the ongoing costs of maintaining the program. The exact amount has not yet been determined, Fullan says, but will not exceed $140 per candidate.
There also will be an expected increase in the cost of pre-examination courses that candidates are required to take from certified course providers. (Although Quebec candidates are not currently required to take a pre-exam course, this will become mandatory under the harmonized model.)
With the new requirement for course providers to purchase standardized course materials from the regulators instead of using their own materials, Gardias says, course providers’ margins will be squeezed.
“There’s cost savings when you’re allowed to manufacture your own products,” he says. “We essentially become resellers now; we’re pushed out of the publishing space. Costs are going to go up.”
Although some course providers, such as London Life, subsidize these costs for LLQP candidates, most providers pass on the costs to individual candidates.
Despite concerns with certain aspects of the LLQP reforms, the insurance industry generally supports CISRO’s goal of harmonization. Says Cunneen: “It brings some consistency to the accreditation, and it brings some consistency to the calibre of people we’re bringing into the industry.”
Harmonization also is beneficial to advisors – particularly those who move from one province to another, or who work with clients in multiple provinces. With no major differences in the insurance needs of clients in different parts of the country, says Lawrence Geller, president of Campbellville, Ont.-based L.I. Geller Insurance Agencies Ltd., it makes sense for the advisors serving those clients to face the same licensing process.
“We’re now in a world in which prospective clients can contact us from any jurisdiction much more easily than in the past,” Geller says. “Anything you can do to create a more fluid transition, a better passport system, has to be to the advantage of the [insurance] profession.”
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