The Financial Services Regulatory Authority of Ontario has proposed a new rule to create a separate licensing class for life and health managing general agencies.laflor/iStockPhoto / Getty Images
Proposed regulations intended to boost oversight of Ontario’s life and health insurance managing general agencies (MGAs) should result in better training and standards for life insurance agents in the province, industry experts say.
“If MGAs are more accountable for the work of their agents, they’ll make their agents accountable for the work they do,” says Jim Ruta, principal at consulting firm Advisorcraft Solis in Burlington, Ont.
While some MGAs have done “a fabulous job” recruiting new agents in recent years, “what they maybe haven’t done is focused on quality over quantity,” says Byren Innes, managing director of Jennings Consulting Ltd. in Toronto.
MGAs also may not be providing new agents with adequate training to make sure their agents are strong advisors and “not just people who happen to have [an insurance] licence,” Mr. Innes adds.
On Jan. 28, the Financial Services Regulatory Authority of Ontario (FSRA) published proposed Rule 2025-001 – Life and Health Insurance Managing General Agencies, which builds on amendments to the province’s Insurance Act passed into law this past November to create a separate licensing class for life and health MGAs.
In a release accompanying the announcement, FSRA said the rule would help ensure consumers are treated fairly and are receiving advice from “well-trained and properly supervised agents.” The proposed rule is out for consultation until March 31.
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.
Despite playing this role, MGAs did not have a specific licensing regime in Ontario, although many chose to license as corporate or partnership insurance agents.
After supervisory reviews in 2021 and 2023, FSRA concluded there was potential for consumer harm in the industry due to MGAs inadequately screening, training and monitoring of agents.
According to FSRA’s 2021 report, these potential harms included agents who might not be “sufficiently trained or knowledgeable” as well as “issues with product suitability, churning, misrepresentation, tied selling, undue influence, and/or conflicts of interest.”
FSRA’s proposed rule is meant to establish “clear” licensing, compliance and agent oversight requirements for MGAs and boost accountability for both insurers and MGAs by “clarifying roles and responsibilities in agent supervision.”
For example, each MGA must have a designated representative responsible for overseeing the agency’s compliance system.
Mr. Innes says the proposed rule will force MGAs to demonstrate they have training and supervisory programs in place. FSRA will be able to say, “Show it to me. Give me the evidence. How many [agents] did you monitor last year?”
Nevertheless, under the proposed rule, insurers remain ultimately responsible for associated MGAs to be compliant, Mr. Innes says. “You have to make sure your distributors are doing the right thing.”
The proposed rule also requires agents to complete required training, avoid or manage conflicts of interest and provide insurers and MGAs with the information they need to monitor agent compliance. (Agents will not be required to give insurers information about sales to other insurers under the rule.)
When it comes to new requirements, FSRA’s rule “is more about the MGAs and the insurers than it is the agents,” says Cindy David, president and estate planning advisor with Cindy David Financial Group Ltd. in Vancouver.
For example, the rule says an agent must act with honesty and integrity, which “shouldn’t be a burden to anybody,” Ms. David says. “Consumers need to have confidence in our industry.”
Mr. Innes says he expects that implementing FSRA’s rule may represent a cost burden for some MGAs, especially sub-MGAs, to the extent that they don’t already have compliance systems and staff in place.
That could lead to “another round of consolidation” in the industry if the proposed rule is adopted, he says.
Mr. Innes lauds that FSRA’s proposed rule attempts to address the issue of so-called orphaned clients who hold policies sold by agents no longer in the business. The rule doesn’t prescribe a set solution but places a client service continuity obligation on insurers and MGAs.
“The servicing of in-force clients is going to be on the radar of regulators, and that’s new,” he says.