Managing general agents asked insurers to get their technological act together and modernize data transfer between themselves and the distribution channel during a panel discussion held during The Insurance and Investments Convention on Nov. 13 in Montreal.

"We're still working as if we were in the 1980s," said Charles Copoloff, Vice President, of Copoloff Insurance Agencies who was one of four participants on the managing general agency (MGA) panel called The Future of the Independent Financial Advisory Network.

For instance, MGAs are obliged to re-enter client information manually even though an insurer has all the information on their computer system. This is in sharp contrast to the way the mutual industry has been operating for many years now with their FundServ system that allows for downloading and uploading of information electronically.

For several years the insurance industry has been working on Canadian Insurance Transaction Standardization (CITS) data exchange standards with the goal of automating data transfer industry-wide. Mr. Copoloff isn't optimistic that the situation will be resolved for several years. "I'm very frustrated."

Panellist John Hamilton, President of Financial Horizons Group, said that an organization called Canadian Life Insurance EDI Standards (CLIEDIS) has been working very hard for 10 years to get the life companies up to speed. "There is progress being made but it is really the life companies, in my opinion, and many MGAs, that are not grabbing it..."

On the MGA side, Mr. Hamilton says there are a lot of smaller MGAs that do not want to invest in the new systems required to automate data transfer. Meanwhile, a number of the larger MGAs are investing in the software required, he says. The large MGAs want this to happen but the insurers are not listening, Mr. Hamilton adds. "That has to change. We have to get the life companies onside. The technology is there, the life companies have the software, they are printing commission statements, they are doing downloads...Their [systems] are just not talking to us and we're not talking to them."

The perfect example of how this causes problems for MGAs is when an advisor who is with company XYZ decides to move to another MGA. "You have to do all new paperwork...even though the life company already has all the information. They don't just transfer the information over. That's ridiculous. All of us (large MGAs) have many, many people who are doing transfer paperwork."

Mr. Hamilton calls this issue an ongoing problem "but we have to keep fighting it. We have to support CAILBA (the Canadian Association of Independent Life Brokerage Agencies) and work with CLIEDIS." He estimates an industry-wide technology solution will be a reality within five years.

Mr. Copoloff fears it might take even longer. "We've really got to get the carriers to come together...I'd like to say five years isn't a lot, but it could be a lot longer than five years before we actually see this coming into effect."

One of the major points of data transfer, he adds, is that it must be a two-way street. With Fundserv you can upload and download. With CITS, the insurance standards coming down the pipeline now, it's a one way street. ...It's not going to do our part of it any good because it is a one way street."

Another topic that generated much discussion during the panel event was the issue of recruitment of new blood into the industry. Panel host, Serge Therrien, who is the Publisher of The Insurance Journal and President of The Insurance and Investments Convention, asked the panellists a question about who is responsible for recruiting new blood into the industry: MGAs, insurers or advisors?

Panellist James McMahon, President and CEO, of Force Financière Excel responded, "I think it is the responsibility of all three to some degree." However, he said that for some years now insurance companies have been withdrawing from recruiting new blood into the industry. "They transferred it in our (MGAs') backyard somewhat. Because of this, his firm has had a training school for new advisors for more than four years. "We don't have a choice." Mr. McMahon underlined that his company is putting a great deal of time and energy into recruiting and training new advisors. He would like to see insurers, who have been saving money on training, help support MGA's training initiatives financially.

Regulation

Mr. Therrien also asked panellists whether they believe that regulations will someday impose one MGA per advisor, such as is the case for dealers and advisors in the mutual fund business.

Mr. McMahon said if it happens, it won't be because MGAs are asking for such a model. "It would happen if regulators decide to impose this system. If they did so, it would be for two reasons: to make compliance uniform and for responsibility. He added what his firm wants is "independence for advisors." Mr. Hamilton agreed that a move to such a model would be the initiative of a regulator if it happened. "There might be some MGAs who might think it would be great to get all the business from all their brokers, but you have to be careful what you wish for." Such a system would also mean that the MGA would be responsible, like mutual fund dealers, for its advisors' total compliance and be responsible for all actions.

He says he doesn't think that insurance advisors need the same level of regulation as representatives on the investment side. "Whenever you see these Earl Jones...They're never involving insurance, they're always involving investments." On the mutual fund side, they've had to make dealers responsible for all their representatives actions due to cases of fraud. "We don't so far, knock on wood, seem to have that problem on the insurance side."