The auditor general’s report found numerous holes in FSCO's regulations for life insurance advisors. What will the fallout be?
FSCO is embracing suggestions made by the auditor general aimed at tightening regulations around life and health insurance advisors.
“FSCO welcome the Auditor General’s observations about its life insurance agent licensing system and procedures,” the regulatory body said in an email to Life Health Professional. “While the life insurance agent licensing system by FSCO is generally sound, the audit recommendations will strengthen oversight of the sector.”
Ontario Auditor General Bonnie Lysyk found some serious regulatory gaps in FSCO’s oversight in her report, published last week. “Weaknesses in FSCO’s online licensing system allow life-insurance agents to hold active licences without having entered proper information about whether they have insurance for errors and omissions (to cover client financial losses arising from agent negligence or fraud),” wrote Lysyk. “FSCO has also renewed licences of agents who were disciplined by other financial service regulators, those who declared bankruptcy, and those with criminal records, because it did not investigate their applications.”
All life insurance agents in Ontario are required by law to have E&O coverage. Current E&O regulations stipulate each agent complies with the Insurance Act, the regulations and the agent’s licence. This includes ensuring that agents maintain the required E&O insurance coverage.
But according to Lysyk, FSCO "does not verify the information,” in its online licensing system database of life insurance agents, to ensure that they "have accurately reported on whether they have errors and omissions insurance.”
Lysyk recommended that FSCO establish agreements, with the E&O insurance providers of all life insurance agents, "to provide FSCO with timely information on agents' compliance with insurance requirements, and information about consumer claims made against agents."
“FSCO will explore establishing information-sharing with E&O insurers to ensure full agent compliance, and to receive current information about claims made against agents,” FSCO said. “FSCO is also undertaking enhancements to its on-line licensing system for regulated entities.”
FSCO directly regulated only 18 of 339 insurance companies operating in Ontario. OSFI regulates 279 of those insurers while 42 are farm mutual insurance firms, which are examined by the Ontario Mutual Insurance Association, which FSCO currently oversees.
"It is inefficient for FSCO to oversee such a small number of companies, and it would likely be more practical to establish arrangements with OSFI to oversee all insurers," wrote Lysyk.
FSCO responded saying, “FSCO continues to carefully review all of the report’s recommendations to determine how best they can be implemented; and will also continue to apply modern principles of risk-based regulation to assess compliance risks and the deployment of its resources to fulfill its mandate, in accordance with its published Regulatory Framework.”
“FSCO welcome the Auditor General’s observations about its life insurance agent licensing system and procedures,” the regulatory body said in an email to Life Health Professional. “While the life insurance agent licensing system by FSCO is generally sound, the audit recommendations will strengthen oversight of the sector.”
Ontario Auditor General Bonnie Lysyk found some serious regulatory gaps in FSCO’s oversight in her report, published last week. “Weaknesses in FSCO’s online licensing system allow life-insurance agents to hold active licences without having entered proper information about whether they have insurance for errors and omissions (to cover client financial losses arising from agent negligence or fraud),” wrote Lysyk. “FSCO has also renewed licences of agents who were disciplined by other financial service regulators, those who declared bankruptcy, and those with criminal records, because it did not investigate their applications.”
All life insurance agents in Ontario are required by law to have E&O coverage. Current E&O regulations stipulate each agent complies with the Insurance Act, the regulations and the agent’s licence. This includes ensuring that agents maintain the required E&O insurance coverage.
But according to Lysyk, FSCO "does not verify the information,” in its online licensing system database of life insurance agents, to ensure that they "have accurately reported on whether they have errors and omissions insurance.”
Lysyk recommended that FSCO establish agreements, with the E&O insurance providers of all life insurance agents, "to provide FSCO with timely information on agents' compliance with insurance requirements, and information about consumer claims made against agents."
“FSCO will explore establishing information-sharing with E&O insurers to ensure full agent compliance, and to receive current information about claims made against agents,” FSCO said. “FSCO is also undertaking enhancements to its on-line licensing system for regulated entities.”
FSCO directly regulated only 18 of 339 insurance companies operating in Ontario. OSFI regulates 279 of those insurers while 42 are farm mutual insurance firms, which are examined by the Ontario Mutual Insurance Association, which FSCO currently oversees.
"It is inefficient for FSCO to oversee such a small number of companies, and it would likely be more practical to establish arrangements with OSFI to oversee all insurers," wrote Lysyk.
FSCO responded saying, “FSCO continues to carefully review all of the report’s recommendations to determine how best they can be implemented; and will also continue to apply modern principles of risk-based regulation to assess compliance risks and the deployment of its resources to fulfill its mandate, in accordance with its published Regulatory Framework.”
