FSRA reviews 57 life agent reporting forms

The Financial Services Regulatory Authority of Ontario (FSRA) has released its second annual report detailing agent misconduct within the life and health insurance sector. The 2020/2021 report, released on Monday, is based on life agent reporting forms (LARFs).

Insurers are required to report unsuitable agents to the regulator, and are advised to do so by filing LARFs.

“Agent suitability is essential in achieving fair treatment of customers,” the report said. “It starts with screening agents for suitability and continues with monitoring agents’ business practices throughout their careers.”

From the beginning of April 2020 though March 2021, FSRA received 57 LARFs, the report said. That compares to 52 in the previous fiscal year, which was shorter because it began following FSRA’s launch.

Multiple types of misconduct were identified in the majority of LARFs received, the current report said, which aligned with the previous year’s findings. The most common misconduct types reported were fraud, misrepresentation to the company, and forgery.

Of the 57 LARFs received, 28 files (about 49%) were closed — most with a warning letter (19). Licensing violations were the most common misconduct type associated with warning letters. But results were varied and also included forgery and fraud, misrepresentation, and conflicts.

The rationale to issue a warning letter was based on evidence provided by the insurers, the report said, such as terminating the agent’s contract or placing an agent under close supervision.

Warning letters are documented on the agent’s licensing file and red-flagged by FSRA’s licensing system, the report said. When an agent applies to renew their active licence or reinstate their lapsed one, the warning letter will be evaluated “to make an informed decision on the renewal,” it said.

Of the 28 closed files, six resulted in no action. The reasons included FSRA’s lack of jurisdiction (two), insufficient evidence (two) and lapsed licensing (two).

In files that resulted in no action, FSRA still red-flags the agents’ licensing files, the report said.

The remaining three closed files resulted in voluntary licence surrender.

Of the 57 LARFs, 23 files (about 40%) were escalated for further investigation, and six remain under review, the report said.

The 23 escalated files included allegations of pervasive misrepresentation to insurers and clients, misappropriation of client funds, fronting for unlicensed entities, unlicensed activities, and trafficking in life insurance.

The report also provided an update on escalated LARFs from the previous year, which comprised 19 files, including three following the publication of last year’s report. Of these 19, one file was closed with a warning letter, two were closed with licence surrender for a period of two years, and six were subject to enforcement proceedings. The other 10 remain under investigation.

In fall 2020, FRSA created a life and health agent team within market conduct to supervise life and health insurance agents’ conduct and business practices. The team reviews agents who are the subject of a LARF. The regulator will share its life and health agent supervisory framework in the coming months, the report said.

In a release last month, the regulator said it had reviewed a life agent in response to multiple LARFs filed by insurers. The agent had sold policies that were terminated soon after the agent received commission — and had done so with general managing agencies over several years using the same pool of clients.

As a result, the regulator required a lifetime licence surrender, FSRA said in the release.