The 2024 Ontario Fall Economic Statement introduced amendments to the Insurance Act that will require licensing of life and accident & sickness (A&S) managing general agents (MGAs). These amendments, set out in Bill 216, the Building Ontario For You Act (Budget Measures), 2024, follow a consultation by the Ministry of Finance held earlier this year on a proposed framework for the licensing of life and A&S MGAs.
What you need to know
- The amendments give the Financial Services Regulatory Authority (FSRA) broad rule-making authority over MGAs, and clarify the duties of insurers, MGAs and agents.
- MGAs will be required to develop compliance systems to ensure that they and any sub-MGAs and agents with which they have agreements comply with the insurance legislation and FSRA's rules.
- Insurers will have to notify FSRA within 30 days of entering into, terminating or amending any MGA agreement.
Licensing
A corporation, partnership or other prescribed entity (not an individual) performing any one or more of the following services must obtain a license to operate as an MGA:
- recruiting agents or prospective agents;
- screening agents or prospective agents for suitability;
- providing training to agents;
- supervising or monitoring agents' activities;
- entering into written agreements with agents who sell or solicit life or A&S insurance;
- recommending life or A&S insurance agents to insurers; or
- transmitting an insurance application or policy between an insurer and an agent.
Licensing is also required for sub-managing general agents, being intermediaries that perform such services pursuant to an agreement with another MGA or sub-MGA, rather than directly with an insurer.
FSRA authority
Under the Bill, the Financial Services Regulatory Authority of Ontario (FSRA) is given broad authority to prescribe rules establishing other activities for which licensing as an MGA is required. The rules will have the force of law.
FSRA will also have the authority to create rules to:
- establish standards for the performance of the activities of the MGA described above;
- establish the roles and responsibilities of insurers, MGAs and sub-MGAs in performing the activities described above; and
- prohibit insurers, MGAs, sub-MGAs and agents from performing regulated activities.
MGAs will be required to develop compliance systems to ensure that they and any sub-MGAs and agents with which they have agreements comply with the insurance legislation and FSRA's rules, and they will be required to monitor the compliance systems of their sub-MGAs. MGAs will be required to designate a compliance representative who satisfies FSRA's criteria to perform such duties as are prescribed by FSRA's rules. Insurers will be required to monitor the compliance systems of their MGAs, and both MGAs and insurers will have to comply with reporting requirements relating to their compliance systems.
Insurers will have to notify FSRA within 30 days of entering into, terminating or amending any MGA agreement, including providing FSRA with copies of the agreement, amendment or termination and, if the agreement is terminated, the reason for termination. Similar obligations will apply to MGAs with respect to their agreements with sub-MGAs.
This is a step away from harmonization with the requirements for MGAs that presently exist in other provinces, the significance of which will become apparent with the release of FSRA's rules for the licensing and oversight of MGAs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.