Ontario Proposes Stricter Oversight for Life and Health Insurance Agencies
The Financial Services Regulatory Authority of Ontario (FSRA) has proposed a new rule that aims to increase oversight of managing general agencies (MGAs) in the life and health insurance sector. The proposed regulations, which build upon amendments to the province’s Insurance Act passed in November, seek to create a separate licensing class for these agencies.
Industry experts believe the rule will help to improve standards and training for life insurance agents in Ontario. According to Jim Ruta, principal at Advisorcraft Solis, “If MGAs are more accountable for the work of their agents, they’ll make their agents accountable for the work they do.”
Byren Innes, managing director of Jennings Consulting Ltd., notes that while MGAs have been successful in recruiting new agents, they may not have always prioritized quality over quantity. He also suggests that some new agents may lack adequate training to be strong advisors, instead of simply possessing a license. “Are they strong advisors and not just people who happen to have [an insurance] licence?”, Mr. Innes asks.
FSRA published the proposed Rule 2025-001 on January 28. The organization stated that the rule is intended to ensure consumers receive fair treatment and advice from well-trained, properly supervised agents. The public has until March 31 to provide feedback on the proposal.
MGAs act as intermediaries between agents and insurers. FSRA data indicates that almost two-thirds of new life and health insurance premiums in the province are distributed through intermediary channels. Despite this significant role, MGAs in Ontario previously lacked a specific licensing regime, although many chose to get licensed as corporate or partnership insurance agents.
Supervisory reviews conducted by FSRA in 2021 and 2023 revealed potential risks to consumers resulting from inadequate screening, training, and monitoring of agents by some MGAs. The 2021 report highlighted potential concerns such as agents lacking sufficient knowledge or training, as well as issues related to product suitability, misrepresentation, conflicts of interest, and other practices.
The proposed rule aims to establish clear licensing, compliance, and agent oversight requirements for MGAs. The rule aims to clarify the roles and responsibilities in agent supervision, increasing accountability for both insurers and MGAs. For example, each MGA must have a designated representative to monitor the agency’s compliance system.
Innes believes the regulations will pressure MGAs to show they have training and supervisory programs in place, and FSRA would be able to ask for evidence of such programs. Nevertheless, insurers will still retain ultimate responsibility for associated MGAs to be compliant. The rule will also require agents to complete required training, manage conflicts of interest, and provide insurers and MGAs with the information they need for agent compliance.
Cindy David, president and estate planning advisor with Cindy David Financial Group Ltd., stated that FSRA’s rule “is more about the MGAs and the insurers than it is the agents.” David explained that the requirement for agents to act with honesty and integrity “shouldn’t be a burden to anybody,” Ms. David says. “Consumers need to have confidence in our industry.” Innes expects that implementing this rule will represent a cost burden for some MGAs, particularly smaller agencies, which could lead to industry consolidations.
Innes also commended the proposal’s effort to tackle the issue of orphaned clients, who are policyholders whose agents are no longer active in the business. The rule mandates a client service continuity obligation on insurers and MGAs, although it does not prescribe specific solutions.
“The servicing of in-force clients is going to be on the radar of regulators, and that’s new,” he says.
