One of the recommendations of the brief published by Quebec MGAs in 2012 resonated strongly with Eric Stevenson of the Autorité des marchés financiers: agent firms. Under this proposal, representatives would be attached to a single managing general agent.
The freedom that advisors have today to deal with several MGAs raises difficulties, Michel Kirouac of Groupe Cloutier contends. Detecting and managing systematic replacements and determining the origin of sales has become very complicated.
“We don’t know where they come from. Are advisors eliminating their portfolio from Company X to bring business to us? On the other hand, it is also hard to detect the origin of an abnormal lapse rate for policies placed with us,” Kirouac says.
It is also difficult to check how well a product sold by an advisor suits the clients’ needs if they deal with three different MGAs for life insurance, disability and segregated funds, for example. “We don’t have the overall picture of the client.”
Other difficult cases to manage are follow-up and debt collection for cases in which the advisor is working with other MGAs, client complaints about a product placed with another MGA, and orphan policies. “Unique oversight makes these tough cases easier to detect, control and correct. But it is not sufficient in itself; it needs legal recognition,” Kirouac explains.
Michel Paquet of Manulife sees advantages in MGAs being governed by unique oversight. For one, they could detect problems more quickly and easily.
He also expressed doubts. “Some MGAs don’t have contractual agreements with all insurers. What would the requirements be to become a managing general agent? Would they be so strict that they deter newcomers from entering the market?”
Registration also meets a need for visibility, Michel Kirouac says. “Right now, we are a firm like many others. Legal recognition would make MGAs better known by the public and consumers.”
He adds that although MGAs obtain and manipulate extensive client information, clients have no idea that such an entity exists. “In securities, mutual funds, P&C insurance and mortgage brokerage, all stakeholders are known to the public and recognized in the law,” he underlines.
Eric Stevenson’s response to this argument: “It is difficult to imagine that a managing general agent can remain invisible to consumers, as important as they are in the distribution chain, with the responsibilities the insurer gave them and the sensitive client information they possess. To ensure fair treatment of consumers, we consider it important that they know exactly who they are dealing with.