MGA regulation covers basic issues at consumer level

The need for increased oversight of MGAs is nowhere near as dire as being made out by the mainstream media. People writing in the popular press don’t really understand the issue, says Rick Forchuk, vice-president of Retail Insurance Distribution at Kingston-based Empire Life.

“There’s no real understanding or passion around the issue,” he says. “It seems they get most of their information from the two-pager executive summary [done by] the Canadian Council of Insurance Regulators (CCIR).”

He argues the issue of increased regulation of MGAs doesn’t resonate at the consumer level and amounts to a tempest in a teapot.

The Agencies Regulation Committee (ARC) of the Canadian Council of Insurance Regulators (CCIR) recently submitted a position paper addressing potential MGA-related issues raised by the public and media.

In its report, drawn from consultations with a variety of stakeholders, ARC outlined recommendations with a view to enhancing and harmonizing best practices in the MGA distribution channel.

Concerns with CCIR paper

There may be some resistance to ARC’s recommendation with regards to oversight of advisors dealing with multiple MGAs, which happens to be at odds with the Canadian Association of Independent Brokerage Agencies’ (CAILBA) position.

Byren Innes, senior vice-president and director of NewLink Group consultancy, told Advisor.ca, “When you have multiple places where [advisors] can do business, who is responsible for [them]?” The answer in this document is the person responsible for you is the person you write the business for. CAILBA’s position was that the agent is the person primarily responsible for product suitability.”

“The CCIR has made some great recommendations,” says Forchuk. “They will be dealt with appropriately and the consumer will be better protected than they are today. It’s good that the CCIR is taking that kind of interest.”

But that’s not to say the current level of protection is inadequate, he adds.

“Most of what’s required already exists either in CLHIA guidelines, or in those of the carrier companies that deal with MGAs,” says Forchuk. “The CCIR’s giving it a format, a handle, so that everyone speaks the same language and that’s a good thing.”

All that’s required is some fine tuning and better communication of these guidelines without being onerous, or overregulated.

The end goal is better consumer protection, so the impact of increased regulation, if there ultimately is any, is expected to be positive.

“Most of the major carriers already do what the CCIR is suggesting, so there isn’t a tightening of the screws, [only] some small gaps in terms of who does what that could be filled,” says Forchuk.

And that’s one of the key aspects of a regulator’s role. As for MGAs, they’ve got businesses to run. And members of the insurance industry have been unanimous in their voicing that the MGA system doesn’t present a risk to the consumer, but provides flexibility and choice,which is in the consumer’s best interest.

“The business of commerce needs to carry on and most of the regulators and CCIR have been very aware of that,” says Forchuk. “I’m not one that sees [regulatory oversight] as any bogeyman, or a big brother waiting there to make our lives more difficult.”

Vikram Barhat is content editor at Advisor Group.