A review of the insurer-MGA relationship in Ontario has identified gaps and a lack of clarity relating to the roles and responsibilities shared among insurers, MGAs and independent agents. 

The review, conducted by the Financial Services Regulatory Authority (FSRA) in Ontario, found that the most prevalent distribution channel in the province came from independent agents who placed life and health insurance business through MGAs. 

But FSRA said contracts between insurers and MGAs do not explain in detail what actions MGAs are required to take or what standards they are required to meet for screening, training, and monitoring insurance agents. 

Insurers need to assess risks 

As well, the regulator said insurers don’t have an in-depth process to assess the risks associated with their MGAs, which could help insurers identify higher risk MGAs that may require more attention. 

On top of this, said FSRA, insurers don’t conduct “a meaningful volume of agent reviews” to determine if they comply with regulatory obligations and industry best practices. 

FSRA said the results of the review will help it develop an evidence-based approach to address regulatory risks and challenges posed by the MGA distribution channel in Ontario, with an ultimate goal of enhanced consumer protection. 

Consumers may be harmed 

When there are no clear roles among the parties, consumers interests may not be given enough attention and can cause harm to some consumers, FSRA added. 

Other pitfalls consumers could be exposed to when agents are not supervised properly include issues with product suitability, churning, misrepresentation, tied selling, undue influence, and/or conflicts of interest. 

FSRA said many insurers have delegated a variety of agent-related functions to MGAs. “However, the delegation of agent-related functions to MGAs does not discharge insurers of their oversight responsibilities.”