FSRA’s two recent reports – which include reviews done between May, 2022, and April, 2023 – examined agents from Greatway Financial Inc., World Financial Group Insurance Agency of Canada and Experior Financial Inc.Ontario’s insurance regulator has launched dozens of enforcement actions against agents who work at some of Canada’s largest insurance brokerages after a review uncovered troubling sales practices.
The infractions included unsuitable sales practices, gaps in adviser training, advisers failing to complete continuing education courses as required to maintain an insurance licence, not following best practices and advisers not disclosing conflicts of interest to clients when they are being compensated by insurers.
“When compensation for life agents is heavily influenced by the sales of individuals they recruit, this creates the potential to focus on recruiting to greater extent than agent suitability and customer needs analysis,” FSRA said in Tuesday’s report. And in August, the Financial Markets Authority, a regulatory and supervisory body for Quebec’s financial sector, imposed a $200,000 administrative penalties and issued orders against World Financial Group Insurance Agency of Canada after a review of its supervision, transactional activities and product suitability found it did not have an adequate compliance system.
FSRA found many inexperienced life agents at the agencies were predominantly selling universal life products – a complex and specialized insurance product that typically allows consumers to pay a fixed premium for a specific amount of death benefit, as well as a second monetary portion to be placed in a savings cash account. The product is considered to be unsuitable for many consumers as it is an expensive product to save for retirement.
The introduction of TFSAs in 2009, along with tax rule changes in 2017 that limit contributions to insurance policies, left universal life policies most appropriate for specific niche clients who have typically already maxed out other saving vehicles.
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