Insurance industry associations warn that proposed rule changes have an 'overbroad scope' that could affect independent, incorporated insurance agents negatively.Nuthawut Somsuk/iStockPhoto / Getty Images
Proposed new rules regulating Ontario’s life insurance agents are a step in the right direction, insurance industry observers say, but recent revisions leave regulations open to interpretation and unintended outcomes.
Advcocis, the professional association for financial advisors representing thousands of insurance agents in Ontario, is concerned that the latest changes by the Financial Services Regulatory Authority (FSRA) to its proposed rule for managing general agents (MGAs) may go too far, creating unnecessary red tape that could threaten some independent advisors’ livelihoods.
Specifically, FSRA’s updated proposal, published in October, applies the term MGA more broadly, leading to industry concerns that licensed advisors and small corporate agencies may now be treated as MGAs.
Advocis’s submission to FSRA on the updated proposal, made in partnership with the Conference for Advanced Life Underwriting (CALU), warns that the changes have an “overbroad scope.” As a result, they wrote, thousands of licensed advisors and small corporate agencies that never operated as MGAs could now be treated as such and “swept into an unexpected and disproportionate regulatory regime.”
“The latest version appears to have additional compliance obligations for these advisors, even though compliance is already undertaken by the MGAs with which they’re associated,” says Kelly Gorman, president and chief executive officer of Advocis.
The version of the proposed rule published in October is significantly different from the proposal published earlier in 2025, she notes, for which stakeholders, including Advocis, provided guidance. The comment period for the latest round ended in November.
The broader application of the term MGA would mean new fees and compliance obligations, straining small advisory practices and reducing the time and resources available to serve clients, the industry groups wrote in their submission. It could also mean that advisors who contract with or bring new agents into their business – for succession planning, for example – would need to be licensed as MGAs.
FSRA maintains that changes to how insurance agents are monitored and educated in Ontario are needed, based on reviews by the regulatory body that found certain practices in the life and health insurance distribution channel harmed consumers.
One 2023 FSRA report found instances in which agents sold consumers expensive universal life insurance policies in cases in which no specific need for the product had been identified.
An MGA serves as an intermediary channel between agents and smaller MGAs (called sub-MGAs), and insurers. According to FSRA, almost two-thirds of total new premiums for life and health insurance in the province are distributed through intermediary channels.
The proposed rule aims to eliminate the sale of unsuitable policies by ensuring MGAs carry out their role in providing oversight over the agents who work with them.
These problems have been long-running, dating to the creation of MGAs, says Harold Geller, a lawyer specializing in financial loss litigation at Geller Law in Ottawa.
“In the 1990s, insurers understood they could insulate themselves from some liability and contract out one of their functions, i.e. compliance, to an intermediary, which became known as an MGA,” he says.
Yet, Mr. Geller notes that MGAs’ revenue comes from fees from the insurance products sold to consumers by the agents they’re supposed to supervise. “So, they have a conflict of interest.”
He adds that the new rules are meant to ensure MGAs serve a role similar to regulated investment dealers, which provide compliance services for and training of advisors.
Although better oversight of MGAs is required, stakeholders worry the latest revision of the proposed rules could involve “as many as 5,000 corporate agencies” – effectively agents working directly with consumers – now classified as MGAs under the proposed tiered system, says Byren Innes, chief executive officer of Jennings Consulting.
The key concern is that greying advisors operating small, incorporated agencies and looking to retire may face heightened compliance obligations and new fees at an inopportune time.
“If I’m a retiring agent and I recruit my daughter, I could be considered an MGA because of the lack of clarity with the latest proposal,” Mr. Innes says.
These agents could find themselves responsible for additional compliance that’s largely redundant because their affiliated MGA already provides that role, he adds.
Facing tighter regulation and higher costs, “these family-run businesses are going to say, ‘This isn’t worth it to me with this regulatory burden, and I will get out of the business,’” Ms. Gorman says. “And the end result is there’s going to be less financial advice for Ontarians.”
Overall, the province’s insurance agents are providing good advice to consumers on insurance products, noting FRSA’s investigations focus on a small minority of bad actors, Mr. Innes says.
Yet, he admits these problems exist in part because of a lack of clarity about responsibility for monitoring whether products sold are sufficiently suitable for consumers purchasing them.
One problem, he says, is that MGAs have argued that monitoring is increasingly challenging as most policies are sold using digitized documents sent directly to the insurers.
“They have said, ‘We’re not at the kitchen table when that policy is sold, so we don’t necessarily see it.’”
Mr. Geller questions that argument, noting many Ontarians buy other investments “at the kitchen table” with dealer oversight while still meeting compliance obligations.
Ms. Gorman says she’s hopeful FSRA, insurers, MGAs and other stakeholders will work together to fine-tune the rules.
“Right now, the revised rules are too broad,” she says, noting advisors in other provinces with Ontario clients could face new responsibilities and costs.
“Most industry players want to comply, but they need clarity in what they’re supposed to do.”
Mr. Geller notes the proposed rules, which are expected to be finalized this year and implemented by summer, need some changes, including clearer suitability criteria.
“I have my criticisms, but let’s not throw the baby out with the bathwater,” Mr. Geller says. “This proposal is a significant step forward.”