The Financial Services Regulatory Authority of Ontario (FSRA) has published its first Life and Health Insurance Agent Supervision Report, detailing FSRA’s review of 115 higher-risk life agents in 2021 and 2022.
“Annual reporting of life agent supervision contributes to public confidence through promoting transparency, disclosure of information and deterring deceptive or fraudulent conduct, practices and activities,” the regulator states in its May 2 announcement about the report’s publication. “The outcomes of these examinations suggest that the life agents reviewed need to improve their overall business practices and that insurers need to review their life agent compliance oversight programs to better monitor and report unsuitable agents.”
Of the 115 examinations conducted, 35 per cent were escalated for further investigation, 23 per cent of those reviewed received business practice letters and 21 per cent of cases were closed with no concerns.
They add that the report includes outcomes from 61 agent suitability complaints received through life agent reporting forms (LARFs) in 2021 and 2022. FSRA closed 57 per cent of these cases and escalated 43 per cent of these case for further review.
The report follows the publication of the Life and Health Insurance Agent Supervision Framework in March 2022. “The framework has been used to test and verify life agent compliance with the Insurance Act, its regulations and Guidance: Conduct of Insurance Business and Fair Treatment of Customers (FTC guidance),” the report states.
In the 2021 and 2022 life agent examinations, FSRA also looked at 405 client files. They say the top three best practices issues identified were the absence of “reasons why” letters, contemporaneous notes, and insurance needs analysis.
They say a reasons why letter is a plain language summary outlining product recommendations and the rationale for the sale.
“Best practices are key to promoting consistent standards for the life and health insurance industry to demonstrate suitability of insurance sales and compliance with FTC guidance,” the report states. “As indicated in the framework publication, FSRA intends to consult with the industry on integrating best practices enforcement into the framework in support of fair treatment of customers.”
In Ontario, FSRA licenses and supervises nearly 60,000 life agents working on behalf of 70 companies also licensed in the province. The regulator says it is concerned there may be underreporting of unsuitable agents in the province. It adds that life agent suitability remains a priority for its life agent unit.
They also add that best practices will continue to be integrated into the regulatory framework going forward. “The correlation between not following best practices and contraventions of the Act suggest that increased oversight towards best practices would promote financial safety, support fair treatment of consumers and facilitate principles-based and outcomes-focused regulation within the life insurance sector.”
The report concludes, repeating that outcomes appear to demonstrate a link between contraventions of the Insurance Act and not following industry best practices. “FSRA intends to consult on how such practices may become requirements in Ontario.”
