Beyond regulatory consultations, MGAs are facing challenges in 2017 that will redraw the map of insurance and financial services distribution in Canada.
Terri Botosan, president of Hub Financial, pinpoints several issues. For one, she thinks that suppliers will review their products in light of the capital requirements ushered in by the new solvency tests in 2018.
Actuaries with the Office of the Superintendent of Financial Institutions say that the coming into effect of the Life Insurance Capital Adequacy Test (LICAT) guideline will not overly modify the quantity of capital compared with the current Minimum Continuing Capital and Surplus Requirements (MCCSR).
All the same, Botosan expects to see pressure on whole life product prices. “The changes will be most impactful to long-term guarantees within products, and carriers will have to take a broad look and make sure their products, universal life and level cost of insurance, as an example, are appropriately priced,” she says.
Several issues may disrupt MGA’s activities, Botosan predicts. “FinTech is more disruptive on the investment side. On the Internet sales side, we believe that life and living benefits insurance is still pretty much sold, not bought,” she says.
Michael Williams, a BridgeForce Financial Group (BFG) partner and president of the Canada-wide MGA association CAILBA, also has concerns about online sales. “Regarding the Internet insurance sales side, we have to make sure the financial needs analysis is done and that the client received the right advice. We require a level playing field,” he says.
Another challenge: “On the technology side, we are trying to put together a strategy to push forward inforce feeds projects for the back-office systems,” Williams says. “For now, only two insurers provide those feeds on a regular basis and another one on request.”
Procuring persistency reports from insurers also concerns Williams. “For an MGA, persistency reports are like a weather radar. They are the first indicator to detect a problem with an advisor. If 100 policies are sold in 12 months, how many will still be in force in 24 months, 36, 48? If 50 policies fall off the book, we should be looking at this advisor’s business,” Williams explains.
Orphan clients and succession planning issues for advisors are additional important challenges for MGAs, Williams continues. “We’re looking to come up with a solution in collaboration with the Canadian Life and Health Insurance Association (CLHIA), the Independent Financial Brokers of Canada and Advocis,” he says.
“The idea is to create an environment where succession becomes a process instead of a sudden event occurring at the last minute and creating issues for the advisor. We hope to come up with a solution sometime this year. That won’t be the full solution upfront, but it will help with the low hanging fruit.”