So FSRA (govt insurance regulator) is cracking down on Greatway Financial (an MGA) in the life insurance industry who are doing something nasty - they are selling universal life insurance policies (with YRT COI almost certainly) using an ‘insured retirement plan’ strategy, to everyone. Except that strategy is only suitable for high net worth individuals.
And Greatway’s response:
tl;dr Watchyou talkin’ bout willis?
FSRA also recently investigated three MGA’s over their recruitment methods - agents were being financially motivated over downstream/recruiting other agents, instead of selling life insurance.
Of course (!) not a word said about the life insurance companies who’ve been eating all this business right up. Companies are supposed to be accountable, but turns out, not so much. I know that some of these shifty MGA’s make up a substantial part of some company’s life insurance sales - they absolutely know what they’re doing.
What methods does an insurance company have available to evaluate whether an insurance purchase is appropriate? You don’t put your salary or net worth on an application, do you?
You absolutely do all of that. There’s financial underwriting as part of the process.and the underwriter should be ensuring the insurance need is there.
But more importantly, the companies are supposed to be monitoring the mgas and agents. But in practice they really don’t do anything effective. They put in a bunch of compliance paperwork requirements then wash their hands after that. And if you’re selling hundreds or thousands of policies them they’ll let u get away with murder. The companies this mga is selling for absolutely knew what they were doing was inappropriate.
agents are supposed to evaluate that the policy they are selling is appropriate for the buyer. it is part of the (US) life agents exam - plenty of questions along those lines.
New NAIC Model Suitability Reg (adopted in 30 states so far, more states pending) requires that the agent sell only in the “best interest” of the client, i.e., not just the best commission for the agent.
Of course. There’s a ton of paperwork required by agents in Canada.
But the companies are supposed to be responsible for the actions of their agents, and they’re supposed to be monitoring this stuff.
FWIW, the term agent, as used in the life insurance industry, doesn’t mean ‘life insurance salesperson’. It very specifically means ‘agent for company XYQ, who they are representing’. The idea of representing companies is stressed in the retail side of the industry. Agents (at least in canada) get a signed disclosure document with words like "I am representing company XYZ in this transaction’.
My whining and complaining is based around the fact that what the companies do is make sure that the agent has got that signed piece of paper, and done nothing else. Or more specifically, that they’re not held accountable. And the top post is a perfect example of my complaint - the MGA was doing a ton of business I’m sure. Where were the companies that were underwriting their business? And don’t tell me ‘that’s the agent’s responsibility’, because while that’s true, it’s the company’s responsibility very clearly to make sure their agents are doing the right thing. And did the regulators lean on the companies that were accepting this business? Nope.
Yet what I’ve seen is that when agents are selling enough policies, they get the red carpet treatment even when it’s very clear to the company that the sales are inappropriate.
Anyway, I guess that’s just a rant. I have others.
Producers represent the company in tbe us too. And the company (imo) has a real obligation to monitor. Agent conduct on their behalf is on them. I think we agree on that.
Companies are legally responsible for the agents, but agents are notoriously hard to manage. The “vanishing premium UL” mess that made a 60 Minutes program (in the 1990s) was largely due to agents ignoring their companies’ legal admonitions not to guarantee the results. Courts rightly held that guarantees declared by the agents are binding on the company they represent.
Yeah, I recall those - in Canada the lawsuits were centered around whole life instead of UL.
I just did a tour around reading some articles on this stuff again. I’d understood that at the time, the problem (in Canada) was based on bad agent behavior. But this article, from the US, focuses on what the companies were doing (and from reading it, they were likely doing the same thing in Canada): https://www.smithphillips.com/vanishing-premium-litigation
I’ve actually seen vanishing premium UL go bad in Canada - we had another round of it a couple years after the last financial crisis. UL’s didn’t perform as expected of course, and companies (or at least one, though I’d heard multiple) were testing and sending out letters warning of impending doom. This time consumers were still confused/misunderstood/poorly educated, but at least this time the companies were properly papered.
Well I’ll be darn diddly doodled. I was wrong. The regulators ARE looking at the life companies involved in this:
FSRA says it also plans to develop an expanded supervisory plan and initiate a review of selected insurers contracted with the three reviewed managing general agencies (MGAs), beginning with ivari and Industrial Alliance and Financial Services Inc.
I could take a guess at the third company, but I don’t want to name names. Lets just say it’s often referred to as ‘No, it’s not related the Equitable Life company in the US’.
In 2021, of the 46 Greatway life agents who completed the questionnaire, 31 (67
percent) reported placing business with Ivari, 4 (9 percent) reported placing business
with Industrial Alliance Insurance and Financial Services Inc., 4 (9 percent)
responded as “Not Applicable”, 3 (7 percent) reported placing business with Equitable Life Insurance Company of Canada, and 3 (7 percent) responded “None”.
I’ve been saying for years that these companies know full well what’s going on. Absolutely, 100% it’s done with the explicit permission of those three companies. All those shady business dealings make up a not-insignificant portion of those three companies’ sales. The companies have been right on board with this. And where’s the oversight there? They should be the first places getting slapped.
I occasionally get calls from random agents looking for advice. I got a call last week from an agent looking to do one of those financially complex insurance policies on a consumer where it was inappropriate. He tried to justify it by saying he could manage the investments to be positive by timing the market. And guess what, he’s associated with one of the agencies that just got investigated for exactly that practice.
