Do you have a system in place to ensure life agents follow the law?

January 26, 2017

Life Insurance Companies e-Newsletter


Life insurance companies are required to have a system in place that is reasonably designed to ensure the agents acting on their behalf comply with the Insurance Act and Regulations. Among other things, the system should ensure that agents:


  • maintain errors and omissions (E&O) insurance;
  • complete at least 30 hours of continuing education credits every two years; and
  • disclose conflicts of interest / potential conflicts of interest to clients and prospective clients.

The Financial Services Commission of Ontario (FSCO) takes consumer protection seriously and may take regulatory action against life insurers if they fail to meet this requirement.


In addition, if we find an agent is not meeting his or her legal obligations at any time, FSCO may contact the insurer(s) to alert them to the agent’s non-compliance. The Superintendent may take enforcement action against both the agent and associated insurer(s) when warranted.


Enhancements to FSCO’s Licensing Link System

Life insurance companies now have an extra tool in Licensing Link they can use to effectively monitor life insurance agents that are selling their products.


Effective December 1, 2016, life insurance agents are required to provide in Licensing Link the name of every Ontario-licensed life insurer they represent, have a contract with, and/or on whose behalf they sell insurance products. Therefore, life insurance companies can now go into Licensing Link and download a list of all individual agents conducting business on their behalf. Companies can also access information about their agents’ E&O insurance, such as the policy number and expiry date, and may be notified if their agents are not meeting the E&O requirements.


See Bulletin L & H-03/16 for more information about the new reporting requirements for life insurance agents.


FSCO’s goals are to make it easier for life insurers to fulfill their supervisory obligations with agents, and to ensure insurers’ agents renew their E&O insurance each year, as legally required. 


Life insurance agent examinations

FSCO continues to conduct life insurance examinations to assess agents’ compliance with the Insurance Act and Regulations and industry best practices. During the past year, FSCO examined more than 200 life insurance agents. The findings from the review are included in the Life Insurance Agents 2015/16 Compliance Report. The report also sets out FSCO’s expectations of licensed agents.


Life Licence Qualification Program (LLQP) update 


The harmonized LLQP, implemented as of January 1, 2016, had a seamless transition period. Ontario and five other jurisdictions offered the compensatory examination option during the transition period, which ended November 7, 2016. Examinations are now marked on a modular basis.


Disciplinary information-sharing agreements

FSCO has signed information-sharing agreements with the Investment Industry Regulatory Organization of Canada (IIROC), Mutual Fund Dealers Association of Canada (MFDA) and Real Estate Council of Ontario (RECO). Under the agreements, the regulators will share the decisions and sanctions of their respective disciplinary processes and work more closely during the investigative stage. 


FSCO also monitors disciplinary decisions or actions taken by other insurance and financial services regulators. Disciplinary decisions taken by other regulators will trigger a review by FSCO of the sanctioned individual's activities, including consideration of the suitability of the individual to hold a licence. This review may result in an investigation or other appropriate disciplinary action by FSCO.


These agreements strengthen FSCO’s ability to evaluate the suitability of multi-licensed intermediaries.  FSCO will continue to pursue additional partnerships to support regulatory collaboration across regulated sectors.


Enforcement news


In November 2016, the Superintendent of Financial Services issued an administrative monetary penalty i​n the amount of $15,000 to a life insurance company. The life insurance company failed to establish or maintain a system reasonably designed to ensure that each life insurance agent working with the company complies with the Insurance Act. The insurer had contravened subsection 12(1) of Ontario Regulation 347/04 under the Act.


To view all public enforcement notices, refer to FSCO's Enforcement Activities – Insurance Companies web page.


Canadian Council of Insurance Regulators’ (CCIR’s) cooperative supervisory activities


CCIR members are coordinating their efforts to simultaneously conduct thematic and life insurer-specific reviews in multiple jurisdictions. The objectives are to increase information-sharing and coordination among the country’s insurance regulators.


CCIR members approved the Cooperative Supervisory Plan in the summer of 2016. Since then, FSCO has been actively involved in this project. In 2017, FSCO will be leading two insurer-specific cooperative market conduct reviews that focus on key elements pertaining to oversight of life insurance agents, and commercial practices across distribution channels. The final reports will be shared with CCIR members upon completion of the reviews.