Ontario regulator says it has discovered several things that are harming consumers
Ontario’s financial services regulator says it has found several ways in which life and health insurance consumers are being harmed.
In two new reports, the FSRA identified “troubling practices” including many agents lacking training and supervision, and the selling of Universal Life insurance policies that consumers do not need.
In the first report, Life Agent Thematic Examinations: Tiered-Recruitment Model MGA, the regulator discovered that 50% of the 130 life agents working for three managing general agencies (MGAs) examined were found to have committed a combined 184 contraventions of the Insurance Act, which it highlights as “unacceptable levels of non-compliance. Enforcement action was taken against 65 agents.
Many life insurance agents were found not to be engaging in continuing education as required, failing to disclose the insurers they represent or how conflicts of interest will managed, or misrepresenting to the FSRA.
The research also found that 79% of life agents reported being part-time and 72% held an occupation or employment other than a life agent. Around 20% of life agents licensed in Ontario operate under the tiered recruitment model whereby they were compensated based not only on their own insurance sales, but also on insurance sales made by the people they recruit.
Universal Life Insurance
The second report, Observed Practices in the Distribution and Sale of Universal Life Insurance, reveals findings from a deeper review into 24 client files from agents contracted with three managing general agencies that operate under a tiered-recruitment model.
It found that 80% of the files did not demonstrate that UL policies sold were aligned with the customers’ needs or circumstances.
It identified several common themes related to the sale of UL policies that it found concerning:
- no specific life insurance need identified, or a trivial needs analysis
- boilerplate recommendations
- incomplete or inaccurate retirement planning advice
- unrealistic and/or misleading policy illustrations.
FSRA action plan
To address what it has found, the regulator is launching a six-point action plan:
- An enhanced sector supervisory approach
- A new regulatory framework, including a new rule
- An enhanced and targeted guidance.
- Enforcement
- Whistleblower protection
- A consumer education campaign
“To correct troubling business practices, many of which are outlined in two new reports we released today, we developed an informed, evidence-based and transparent course of action to address these regulatory risks and challenges,” explained Huston Loke, EVP of Market Conduct at FSRA.
