The life insurance industry is built on trust, and consumers put their faith in the agent they deal with to navigate a series of choices between complex products. Traditionally each insurer had its own agents, trained and associated solely with the company brand name and agents were in-house representatives of insurance firms such as Manulife Financial Corp, Sun life Financial Inc, etc. When a customer connected with an agent, the choice of insurance company was instantly made, and the only decision left was to pick the right product. When there was a problem or something unusual, the regulator would know because they would contact the responsible insurer was regulated.

For the past two decades the insurance industry has been undergoing major changes. Today, approximately 45% of all life insurance policies, or $6.7 billion worth of life insurance premiums are handled by MGA’s.  Managing General Agents (MGA) evolved from independent agents who faced difficulties joining one of the big insurers. They started working with several firms and built a large client base. The insurance players liked the idea as they gradually and constantly reduced their sales agent force. The insurance firms saw a great opportunity in lowering cost burden of keeping fulltime agents on board; from hiring to training to paying benefits. As the independent agent distribution model (also known as broker channel) started taking hold, MGA’s became larger and larger and now are a significant link in the industry’s value chain.

Today, while insurance companies and agents are subject to roles and laws (agents still have to obtain an individual license), the MGAs are not regulated at all. The link between agents and insurers dissolved.

A recent position paper by the regulators (the Canadian Council of Insurance Regulators) has indicated they are concerned by the issue, and are beginning to study it to determine the correct response.