The Financial Services Regulatory Authority of Ontario (FSRA) has come out with a long-awaited update on its review of Greatway Financial Inc., World Financial Group Insurance Agency of Canada Inc. (WFG), and Experior Financial Inc., by publishing two reports.

Entitled Life Agent Thematic Examinations: Tiered-Recruitment Model MGAs and Observed Practices in the Distribution and Sale of Universal Life Insurance, the reports detail extensive and “unacceptable” levels of life agent non-compliance. As a result of Insurance Act contraventions identified, FSRA took enforcement action against 65 life agents following the reviews.

“FSRA uncovered some troubling practices in the life and health insurance sector which are harming consumers,” they state in an announcement about the publications’ release. “Many agents are not properly trained and supervised, and customers are being sold Universal Life (UL) insurance policies they don’t need.” 

In addition, the regulator has published a six-point action plan which includes enhanced supervision for the sector, new rules and a new regulatory framework, targeted guidance, enforcement, whistleblower protection and a consumer education campaign.

“FSRA will continue to review this area, including a review of insurers where appropriate,” they state.

All told, FSRA examined 130 life agents working for the three managing general agencies (MGAs) identified which use a tiered-recruitment model. The review found 50 per cent of those being examined had contravened the Insurance Act. In addition to the 65 agents sanctioned for contraventions of the Act, 92 life agents, 77 per cent of those reviewed, were cited with a total of 1,302 best practices issues.

Broken down, 46 per cent of the Greatway life agents selected were cited with contraventions of the Insurance Act, 62 per cent of the WFG life agents were cited and 37 per cent of Experior agents selected for examination were cited with contraventions.

Four high-level areas of concern identified include that life agents were compensated not only for their own sales, but also based on the sales of those they recruit; agent training “lacked important substance, rigour and reporting mechanisms,” relatively complex products were sold by those without adequate oversight and insurers and MGAs performed minimal formal and proactive supervision to ensure the fair treatment of customers. “Notably 80 per cent of the files did not demonstrate that UL policies sold were aligned with the customers’ needs or circumstances,” according to the second report about observed practices in the distribution and sale of UL policies.

“It is important to note that life agents selected for examination were representative of the entire group of life agents contracted with each of the subject MGAs and none of the life agents selected were the subject of previous regulatory supervision action by FSRA or otherwise risk identified,” the first report states. “The practices of the life agents of the subject MGAs were observed to be even worse than reviews of life agents that had been specifically selected due to past misconduct.” 

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