Canadian Underwriter

Regulators’ principles of conduct: Are ‘MGAs’ the same as retail brokers?

April 13, 2022   by Jason Contant

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The Financial Services Regulatory Authority of Ontario (FSRA) is proposing to adopt principles of conduct for insurance intermediaries, including adjusters, brokers, MGAs and third-party administrators.

Whether the principles apply to MGAs in the same way as retail brokers is open to question. Retail brokers deal with clients directly, while MGAs are not consumer-facing. MGAs can be loosely understood as “brokerages for brokerages,” albeit with some underwriting authority.

Steve Masnyk, managing director of the Canadian Association of Managing General Agents (CAMGA), says the association will be participating in the consultation.

“P&C MGAs are very different from MGAs on the life/benefits side; our membership does not deal with the public or customers or provide any advice to insureds, so we will suggest a carve-out in the principles for P&C MGAs might be appropriate,” Masnyk says.

Ontario’s regulator is now consulting on guidance that proposes to adopt the Canadian Insurance Services Regulatory Organizations’ (CISRO) Principles of Conduct for Insurance Intermediaries. The principles reflect minimum regulatory conduct standards that are common across Canada regarding the fair treatment of customers, while recognizing that each jurisdiction has its own regulatory approach for the conduct of business, CISRO says in a press release.

“The principles of conduct are guidance and reinforce the fair treatment of customers,” Russ Courtney, senior media relations and digital officer with FSRA tells Canadian Underwriter. “FSRA expects industry to adopt the principles of conduct and work towards the expected outcomes, as appropriate to the size, risk-profile and complexity of their business operations and activities.”

Published Apr. 6, the principles (which apply to customers in P&C as well as the life & health insurance sectors) were finalized following consultation with stakeholders last summer. They apply to intermediaries, which CISRO defines as encompassing “adjusters, agents, brokers and representatives, as well as business entities that distribute insurance products and services, including managing general agencies and third-party administrators.”

The principles will not replace any existing regulation involving brokers, such as the Registered Insurance Brokers Act. They are intended to complement and supplement the Canadian Council of Insurance Regulators/CISRO’s Fair Treatment of Customers Guidance.

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At a high level, the principles outline professional behaviour and conduct expectations for the fair treatment of customers in the following 10 areas (condensed for brevity):

  • Compliance/Outcomes – Complying with all applicable laws, regulations, rules and regulatory codes to which they are subject
  • Customers’ interests – Placing customers’ interests ahead of their own, including when developing, marketing, recommending, distributing and servicing products
  • Conflicts of interest – Identifying, disclosing and managing any actual or potential conflict of interest associated with a transaction or recommendation
  • Advice – Suitable to the needs of the customer based on their disclosed unique circumstances and needs
  • Disclosure – Providing customers with objective, appropriate, relevant, timely and accurate information, and disclosing information to all necessary parties
  • Product and service promotion – Regardless of the distribution model or medium used, ensuring promotions are not misleading, are easy to understand and promoted in a clear and fair manner
  • Claims, complaints handling and dispute resolution – Handling or cooperating in the handling of claims, complaints and disputes in a timely and fair manner
  • Protection of personal and confidential information – Only collecting and retaining information that is necessary and appropriate for the fulfillment of the service or product provided; complying with all applicable privacy legislation
  • Competence – Maintaining an appropriate level of professional knowledge, and staying current through continuing education
  • Oversight – Intermediaries with contractual or regulatory oversight obligations are responsible for any employee or third party involved in the marketing, distribution or servicing of an insurance product.

FSRA is seeking feedback until May 3. Courtney says FSRA is targeting summer or fall for the final guidance to come into effect, after considering feedback received as part of the public consultation.

He adds in the future, FSRA also intends to examine the potential for incorporating the principles of conduct into the Unfair or Deceptive Acts or Practices Rule, which applies to all parties in the insurance system, including non-licensed intermediaries.

Last year, CAMGA’s board and membership approved and adopted an undertaking as a condition of membership beginning Jan. 1. The code “deals with many of these principles,” Masnyk says.

“The code is specifically targetted for the unique position of P&C MGAs as outsourced underwriters of insurance carriers,” Masnyk says. “Our members perform exactly the same function an underwriter employed by a carrier does. The delegated underwriting agreements provide that oversight that the [Fair Treatment of Customers Guidance] requires, and coupled with the CAMGA code provides the appropriate sector-specific framework for P&C MGAs throughout Canada.”


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