Financial Services Regulatory Authority of Ontario Launches First Life and Health Insurance Agent Oversight Framework: What Insurers and Intermediaries Need to Know – Finance & Banking


On March 29, 2022, the Financial Services Regulatory Authority of Ontario (FSRA) announced the launch of its first Life and Health Agent (agents of life) Oversight framework (the Framework). According to FSRA, the [F]ramework will ensure that the life [A]Men in Ontario are subject to proactive oversight for the first time since 2018, promoting transparency and disclosure of information, while deterring deceptive or fraudulent behavior, practices and activities.

For context, a new unit dedicated to personal insurance agents (the LAU) was created within the ARSF Market Conduct Group in late 2020 to develop and implement the framework. The framework was developed in four phases over the course of 2021, with the aim of enabling FSRA to actively supervise life insurance agents while developing the risk profiling and review tools in the frame of the frame. In addition, the framework is linked to existing regulatory requirements for life agents and includes the following four key elements: (i) life agent risk profiling; (ii) life agent examinations; (iii) communications and enforcement actions; and (iv) reports.

The following overview will provide (i) a brief summary of the four phases of Framework implementation; and (ii) the key elements of the framework and its implications for those carrying on life and health insurance business in Ontario.

I. Framework development and implementation phases

(a) Phase 1 – Supervision of Life Agents (December 2020 to June 2021)

Until the creation of the LAU, there had been no proactive supervision of life insurance agents in Ontario since 2018. Prior to the formation of the FSRA, the supervision of life insurance agents in Ontario was generally done in a reactive manner. In January 2021, FSRA launched pilot exam programs (the Pilot exams) to investigate certain life insurance agents who had been the subject of a life insurance agent declaration form (LARF) or consumer complaint (since the creation of the FSRA in 2019).

(b) Phase 2 – Framework development (July to October 2021)

During Phase 2, FSRA began developing the framework based on the results of pilot reviews, its review of LARFs, and additional ad hoc reviews conducted during Phase 1 (listed directly above) . In addition, FSRA organized some “road shows” to present the LAU to industry stakeholders and obtain feedback on the development of the framework.

(c) Phase 3 – Implementation of the framework (November 2021 to March 2022)

FSRA implemented the framework and began proactive reviews of life insurance agents using available risk profiles. This included reviewing certain dual-licensed mortgage broker life insurance agents who had been disciplined by another regulator since 2019, and certain life insurance agents who were subject to consumer complaints.

(d) Phase 4 – March 2022 and beyond

Going forward, FSRA recognizes that efficiency and technology will allow UAL to perform a greater number of examinations (as defined below). However, FSRA plans to consult with industry stakeholders on: (i) what volume of examinations is considered “reasonable and proportionate”; (ii) how life agent relationships can be improved; and (iii) how industry best practices can be incorporated into the framework in the future.

II. Key elements of the Framework

The framework has four key elements, each of which will be described in more detail below.

(a) Risk profile of life insurance agents

The risk profiling of the executive life agent (Risk profiling) aims to take an “effective and risk-based approach to supervision” by focusing on those life insurance agents that present the highest risks to the public from a respective regulatory perspective. The risk profile was developed using FSRA data collected through license applications, renewals, consumer complaints, LARFs and enforcement activities reported by other regulators. Canadians.

(b) Life Agent Reviews

During Phase 2 of the framework’s development and implementation, the LAU began ad-hoc reviews of life insurance agents identified by FSRA’s Licensing Compliance Unit and its complaint and risk assessment (the Exams). FSRA noted that the framework has been used to assess and verify the compliance of life insurance agents with the Insurance Act (Ontario) (the Act), its regulations and the FSRA Guidelines: Conduct of Insurance Business and Fair Treatment of Customers (the FTC Tips) (released January 2021).

c) Communication and enforcement measures

Upon completion of the reviews, the UAL reports any violations of the Act or its regulations to the FSRA Regulatory Disciplinary Officer for further review. Additionally, upon completion of the review, FSRA will communicate one of the following six results to the applicable life insurance agent:

  1. No violation of law, its regulations, or FTC guidelines;

  2. No violation of the Act or its regulations, but violation of non-enforceable business practices by FSRA;

  3. Violations of the Act or its regulations, resulting in an official warning letter;

  4. Violations of the Act or its regulations, resulting in an official warning letter and identifying violations of non-enforceable business practices by FSRA;

  5. Violations of the Act or its regulations, resulting in escalation to the FSRA Legal and Enforcement Unit or a regulatory disciplinary officer for possible enforcement action; Where

  6. Violations of the law or its regulations, resulting in referral to the Legal and Enforcement Unit or a Regulatory Discipline Officer for potential enforcement action and identification of non-enforceable business practice violations by the ARSF.

d) Publication and reporting

FSRA notes that the framework helps achieve FSRA’s statutory objectives by contributing to public trust by promoting transparency, disclosing information and deterring deceptive or fraudulent conduct, practices and activities. As part of the above objectives, FSRA has published various industry reports and advisories outlining the findings of its oversight activities.

III. Key takeaways for personal insurers

FSRA said it expects the number of reviews to increase over time as the process becomes more efficient and incorporates certain technologies. In releasing the framework, the FRSA released some results of the pilot reviews conducted during Phase 1 of the framework’s development. The pilot reviews included 70 officers reviewed by FSRA, of which FSRA identified 105 breaches of the Act. This resulted in formal regulatory findings against 29% of life insurance agents surveyed. Additionally, of 240 life insurance agent client files reviewed in the pilot reviews, 56% of life insurance agents were found not to follow industry best practices.

In its findings on the pilot reviews, the FSRA noted that “these findings suggest that life insurance agents need to improve their overall business practices and that insurers who are required to monitor intermediaries authorized to sell their products need to review their life insurance agent compliance programs.

It is clear that the life and health space has been an area of ​​interest for ARSF and that ARSF intends to be proactive in its investigative and enforcement activities with respect to agents. life insurance. Insurers and intermediaries conducting life and health insurance business in Ontario should carefully review their processes and practices to ensure compliance with the Act, its regulations, the Framework and other applicable FSRA regulatory guidance.

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