Ontario regulator must better define what constitutes an MGA

In its submission to the consultation on Proposed Rule 2025-001 – Life and Health Insurance Managing General Agents, the Canadian Association of Independent Life Brokerage Agencies (CAILBA) says the rule must more clearly define what a managing general agency (MGA) is. 

According to the association, it is problematic that distribution intermediaries engaging in activities similar to those of a managing general agency, without being one in the traditional sense, are able to identify themselves as such. “The lack of clarity in the definition of an MGA creates confusion for our members and complicates their ability to self-identify,” the MGA association writes. 

In its submission to the Financial Services Regulatory Authority of Ontario (FSRA), Financial Horizons argues that the rule should apply only to traditional MGAs, not to sub-MGAs or associate MGAs. 

MGAs have no direct contact with clients. They do not provide services or advice to consumers.
– Nick Pszeniczny, Chair of the Board at Financial Horizons

Nick Pszeniczny, Chair of the Board at Financial Horizons, who signed the submission, describes a traditional MGA as having contractual relationships in two directions: upstream with one or more insurers, and downstream with advisors. 

“MGAs have no direct contact with clients. They do not provide services or advice to consumers. Instead, they provide services to advisors, such as training, support and supervision. Advisors are the ones who provide services and advice to consumers,” Pszeniczny writes. 

He suggests a compromise for the smaller MGAs that oppose the primary MGA model, because it would destroy their business model. Pszeniczny proposes the following three rules: 

• An agent may have no more than two active MGA contracts at any time. 
• An agent with two active MGA contracts must disclose this information to both MGAs, including the identity of the other MGA. 
• If an agent is contracted with two MGAs, then each MGA is authorized and required to share information about the agent and the agent’s clients with the other MGA, to the extent required to responsibly monitor and supervise the agent’s business. 

Pszeniczny underlines that if the MGA is to have primary responsibility for monitoring and supervising its agents, it must be empowered to perform this role. “It is unreasonable and unrealistic to expect an MGA to effectively monitor an agent’s practice if the agent has contracts with multiple MGAs,” he adds. 

Exclude career agencies 

The Canadian Life and Health Insurance Association (CLHIA) is also calling on FSRA to better identify which entities should not be considered MGAs. The association believes exclusive advisor networks affiliated with insurers should not be subject to the MGA licensing requirement. 

It also states that a corporation whose advisors operate through an MGA should not be targeted by the rule. 

Financial Horizons expresses the same view in its submission. Canada Life, which owns the MGA, agrees. The definition of an MGA should not include sub-MGAs “because they do not hold a contract with an insurer to access products,” says David Stewart, Senior Vice-President, Independent Distribution. 

The insurer also considers FSRA’s proposed six-month transition period to be unrealistic, as it is difficult to estimate the required time without knowing the final rule and its specific requirements. It is advocating for an 18- to 24-month timeline. 

The licence could hurt recruitment 

Two MGAs who submitted individual responses argue that advisor firms should not be classified as MGAs. They say the lack of clarity in FSRA’s rule threatens their advisor recruitment business model. 

MGAs that use certain recruitment models appear to face disproportionate challenges.
– Shelden Smollan, Chief Experience Officer of Experior Financial Group

In the submission signed by its Chief Experience Officer, Shelden Smollan, Experior Financial Group describes its business model as “tribrid”—a structure combining features of an MGA, a career agency (exclusive advisors), and network marketing. Exclusive advisors can become sub-MGAs with Experior Financial Group and recruit new advisors. Smollan believes models like this are critical to the renewal and growth of the advisor network. 

Based in Guelph, Ontario, the MGA says its team includes 3,200 licensed independent advisors, 1,900 of whom are in Ontario. “MGAs that use certain recruitment models appear to face disproportionate challenges,” Smollan writes. 

He adds that the proposed rule “appears to make these business models unworkable in Ontario,” as it would prohibit advisors from “engaging in recruitment or training activities unless they are employed by or associated with an MGA.” 

Affiliated with Transamerica, World Financial Group also recruits new advisors. In its submission, President and CEO Rick Williams writes that the proposed rule presents an opportunity to clearly define which entities will fall under Ontario’s Insurance Act and the future MGA licence. 

“Many businesses provide materials and training programs to advisors without being considered MGAs. Requiring them to be licensed, or imposing on MGAs the responsibility of treating them as sub-MGAs, defeats the purpose of the rule,” Williams writes. 

He believes it would be more effective to require MGAs to ensure that training is adequate. 

Group benefits firms poorly defined 

Concerns about the proposed MGA designation are not limited to the individual insurance market. “The work and services we provide to our group benefits advisors are very different from those offered by life insurance MGAs to their advisors,” writes Mario Malatesta, Vice-President of Strategic Partnerships for MGAs at GroupQuest, a firm affiliated with People Corporation. 

Malatesta explains, for example, that group benefits MGAs do not recruit or train advisors, nor do they assess their suitability to act on behalf of insurers, nor supervise or monitor them. 

It’s important to understand that the group benefits client is typically a business
– TPAAC

The Third Party Administrators’ Association of Canada (TPAAC) points to differences between group benefits third-party administrators (TPAs) and life insurance MGAs, particularly in terms of market segment, product offerings and client type. 

TPAAC notes that during a meeting on March 27, the regulator asked the association to define what a third-party administrator is. TPAAC explained that its members administer group benefit plans and serve as liaisons with plan sponsors. Some members also act as third-party claims payers. Consolidator brokers like People Corporation and AGA Assurances collectives are among TPAAC’s members. 

“It’s important to understand that the group benefits client is typically a business and a more sophisticated buyer than the individual client,” TPAAC writes. 

The association notes that group insurance contracts are renewed annually. “The consumer, as plan sponsor, can choose from a wide range of providers both at renewal and afterward, without facing negative consequences,” TPAAC writes. 

Travel industry says no 

In the travel insurance sector, the message is simple: they don’t want the licence. The Travel Health Insurance Association of Canada (THiA) is calling for travel insurers and MGAs operating in that space to be excluded from FSRA’s licensing rule. 

THiA notes that travel insurance is a hybrid product combining elements of life and health insurance with property and casualty coverage. The association clarifies that travel insurance does not include life insurance benefits. 

“The travel insurance sector is not uniformly subject to the same regulatory framework,” the association notes. It adds that the life and health and property and casualty sectors are each governed by distinct regulatory regimes.