On September 9, 2021, the Financial Services Regulatory Authority of Ontario (FSRA) released proposed guidance for life insurance agents’ reporting requirements and insurers’ obligations to ensure agents are in compliance with the Insurance Act (Ontario) and its regulations (the Act).
The proposed guidance clarifies the following three licensee reporting requirements for life insurance professionals: (i) errors and omissions insurance, (ii) continuing education, and (iii) agents’ contracted insurers. The guidance also makes clear certain insurer agent oversight obligations.
Who is targeted by the proposed guidance?
Any life insurance agents, corporate or partnership life agents, and life insurance companies are affected by the proposed guidance. In other words, those impacted include individuals or business entities that hold a license for both life insurance and accident and sickness insurance.
The proposed guidance does not apply to accident and sickness only insurance agents, general insurance agents, or property & casualty insurance companies.
What is the proposed guidance with respect to reporting responsibilities and insurer oversight obligations?
Errors and omission (E&O) insurance
The Act requires all life insurance agents, and life agent corporations and partnerships to obtain a valid E&O policy for at least CA$1 million for any single occurrence and extended coverage for loss resulting from fraudulent acts.
Agents are required to provide FSRA with the E&O policy number, expiry date and the name of the insurer when a license is up for renewal and within five business days of a renewal or change to an E&O policy. However, to minimize reporting requirements, FSRA has noted it does not routinely require a copy of the E&O policy or certificate to be produced or delivered.
Life insurance agents, including life agents acting on behalf of a corporation or partnership, are required to complete a minimum of 30 hours of continuing education every two years. When an agent confirms completion of their continuing education hours to FSRA, they must report the course name, course provider, the date the course was taken and the number of hours completed. FSRA will only recognize hours completed by an agent while the agent is licensed.
Continuing education hours will not be recognized for (i) a course where details cannot be supplied; (ii) a course or program the agent registered and failed to attend; (iii) hours spent as an instructor or teaching a course; (iv) repeating a course, unless the course includes new content; or (v) hours spent on any course that an agent fails.
For life agents that reside in a Canadian jurisdiction other than Ontario, FSRA considers continuing education requirements to be met in following circumstances: (i) the home jurisdiction mandates completion of 30 hours or more every two years; (ii) the agent has taken a course that meets the education requirements; or (iii) where the home jurisdiction requires less than 30 continuing education hours, the agent completes additional hours up to the 30 hour requirement.
Agents are required to report to FSRA the name of every insurer they act on behalf of, including those they represent, have a contract with, or sell insurance products for. The foregoing must be reported to FSRA in the following circumstances: (i) a licensing renewal, (ii) within five business days from the effective date of the agent adding a new contracted insurer, and (iii) within five business days of terminating an existing contract with an insurer. This information is maintained privately from the public and is not required by corporate or partnership agencies when submitting a license application.
Insurers’ obligations under the proposed guidance
Insurers are required to ensure their agents demonstrate ongoing compliance with the Act and the agent’s license. Where an insurer delegates its oversight obligations to third parties, the insurer still maintains this regulatory responsibility.
Insurers retain the flexibility to design a system that oversees each agent acting on behalf of such insurers, to ensure compliance with FSRA’s requirements in respect of E&O insurance, continuing education and contracted insurers, among others.
FSRA provides insurers with access to E&O insurance information for the agents under its supervision and agents who have reported contracting with them. An insurer’s compliance regime must include a policy and procedure to routinely check their agents’ E&O insurance status.
Overall, the guidance seeks to eliminate uncertainty among insurance professionals with respect to certain regulatory requirements. The proposed guidance reflects FSRA’s commitment to providing clarity to insurance professionals regarding agents’ contracting with insurers and E&O insurance reporting requirements, in particular, reporting timelines. The guidance aims to simplify continuing education qualifications and requirements for life insurance agents based in Ontario and other Canadian jurisdictions.
When will the proposed guidance become effective?
The effective date is to be determined as FSRA is currently in the consultation stage. Once effective, the new guidance will replace the following previously circulated directions: PC0039ORG, PC0040ORG, PC0028ORG, Bulletin No. LH-02/96.
The consultation period ends on October 8, 2021.
Dentons Canada’s Insurance Regulation team interacts with the regulators who oversee the insurance industry to help you anticipate the positions they will take and the issues that are forthcoming. If you have any questions, please feel free to reach out to Derek Levinsky and Taschina Ashmeade.