Tighter supervision for new agents?

Under the proposals, “new” agents are those with no prior experience in selling life and health insurance. “Qualified” life insurance agents or supervisors are defined as agents with five years of experience selling life products and holding an active licence within the past seven years. The proposed two-year period would begin when new agents start actively using their licences.

Under the proposals, the supervising agent would be named when the new agent completes the final part of his or her insurance application to the ICBC. From that point forward, the supervising agent will be responsible for overseeing everything the new agent does — from product recommendations to filing applications with insurers.

These proposals follow the spirit of rules in other provinces, in which there is a mentorship or supervisory period for junior agents by more senior agents. In Quebec, for example, a new agent must be under direct supervision of a senior agent for a minimum of 28 hours of full-time work per week for a period of six weeks.

As the situation now stands in B.C., prospective agents can begin selling life insurance on their own once they pass the LLQP exam. However, in practice, some supervision takes place because most new agents generally enter the business as recruits of other agents.

The proposals set a standard for the level of supervision that should take place, says Gerald Matier, executive director of the ICBC: “We want to ensure that someone isn’t simply passing the LLQP and then, the next day, going out and [recommending products] without anyone looking over their shoulder.”

Although the LLQP touches upon the compliance aspects of the life insurance business, new agents still need to see what those aspects of the business look like in practice, Matier adds: “We want to be sure that new agents understand what proper file maintenance is and how important it is for compliance purposes.”

Paperwork is especially critical in situations in which there is a client complaint. Without documents supporting what products were sold to the client and why, the case could turn into a “he said/she said” type of situation, Matier adds.

The insurance industry has until Jan. 13, 2012, to comment on the ICBC’s proposal. If major revisions are not needed, the proposed rules are expected to come into effect as early as June 1, 2012. Thus far, the response to the proposals has been positive.

By having a supervisor sign off on a new agent’s recommendation, the potential risk of an agent recommending unsuitable products drops dramatically, says Byren Innes, senior vice president and director with Toronto-based insurance consultancy NewLink Group Inc.

“The supervisor must be satisfied that the [new] agent is knowledgable about the policy recommended,” Innes says, “and that the product is appropriate for the client, given the case.”

The proposals also would allow for flexibility in the amount of supervision, which depends on the new agent’s knowledge and skill level throughout the two-year period, says Lawrence Geller, president of Campbellville, Ont.-based L.I. Geller Insurance Agencies Ltd.: “There is a graduated level of supervision, whereby once the [new] agent becomes more competent over time, the level of supervision can be adjusted.”

On the flip side, the level of supervision can increase if a new agent at the latter end of the two-year watch period begins dealing in new products, adds Innes: “If an agent has been selling life insurance for a year and a half and then, all of sudden, sells a critical illness policy, the supervisor has the right to question that recommendation.”

However, insurance industry-watchers have some concerns. For an industry that struggles with succession, the idea of a supervisory or mentorship period makes sense; but it may not be worth the financial risk for the senior agent, says Sam Albanese, insurance industry director with Toronto-based Seneca College’s Centre for Financial Services. “New agents are a big liability,” he says, “and it is unclear how [errors and omission] insurance will be impacted.”

E&O insurance may not cover an agent acting in a supervisor capacity, adds Geller: “If the supervisor is responsible for the agent, will the E&O indemnify him or her? Will supervisors have to pay more for ‘new agent’ coverage?”

There also are the qualifications of the supervisor to consider, says Geller: “There is no provision in the proposed rules to test the supervisor. And the supervisor could be someone who doesn’t necessarily act according to best practices.”

However, once the comment period closes, there will be more clarity brought to these issues, adds Matier: “If an issue comes up that we haven’t considered, we can always add to the proposed rules and clarify them as needed.” IE