Why consumer protection, representation and oversight are needed in the insurance industry?

Why do I believe FSCA is necessary? For the last few years as a consumer advocate I was involved in many cases which clearly demonstrate that some changes are needed. The compelling evidence in my possession made me believe this was going to be a “walk in the park.” However I was extremely surprised by the resistance of the regulators. In fact, I am quite impressed by the breath of their imagination when it came down to finding reasons not to view the evidence in question. This is why I had to create the Financial Services Consumer Alliance (FSCA); to provide more teeth to my advocacy for some very basic changes in the life and financial industry. So what are some of the opened files in question?


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  1. Brian Shumak
    President Brian Shumak Financial Services


    I commend you on fighting on behalf of the consumers in your case examples. There is no doubt a need to do so.

    The question that I pose to you is what form do you see the oversight taking? The reason I ask is that there are a number of regulatory bodies who impose rules that make conducting business more expensive for those of us who do right by the client. Each time a new layer is put into place, the costs go up and there are some who have to leave the business as it is now too expensive for them.

    The problem as I see it is the imposition of new rules and regulations does not achieve what I believe is the desired outcome – namely to properly admonish the perpetrators of the abuse. Rather, I think that the consequences need to be steepened in an attempt to deter. Let’s face it, those who will break the law will do so independent of the regulations put in place but regulations make it more difficult to conduct business for many.

  2. Richard Proteau
    CEO and Founder Financial Services Consumer Alliance

    Brian, I created FSCA to address the commercial practices of insurers when one of the regulator put in writing that they were not responsible for the regulation of the commercial practices of insurers. So if the regulator is not responsible for what an insurer does then who is. This explains why fraudulent commercial practices associated with vanishing premiums or fraudulently increasing MERs on seg funds (Transamerica)… were never investigated by the regulators. It is the consumers through class actions who have addressed these practices. So our target are insurers and not advisors. For example, we want change brought to illustrations software. Again lately I have seen illustrations done at 11.45%. Software should not allow this. (maximum illustrated rate should be 7%). I want software to have the functionality to illustrate variable rate of returns when in index funds.

    We want more disclosure on transfer of seg funds. This may impact advisors with more regulations but the fact is that seg funds are under regulated… We want better disclosure of commission on life insurance sales and a limit to other incentives that represent conflict of interest. I want practices on rated case reviewed…

    And finally I want the orphan policies problem dealt with in favor of licenced advisors.

    As you can see most of what FSCA will do will not impact advisors directly. In fact I believe most advisors want what FSCA want…

  3. Richard Proteau
    CEO and Founder Financial Services Consumer Alliance

    I hope so… in fact I am still surprised by the resistance to these changes.For example another change I am pushing is a clear distinction on who is independent. Some insurers position their agent as being independent when they are not. Yes they work as independent entrepreneurs but their advice is not independent and they can only present the products offered by the company. Also if the insurer offers an MGA to allow these producers to sell products outside of the insurer, the advisor is punished negatively and don’t get any bonusing, sales credits, and the sale does not go towards production numbers. Even the sales staff of the insurer is penalized and don’t get credit for the sale. The whole system pressures the advisor in selling and recommending the product of the insurer and not of the other insurers. So no the advice is not independent… The consumer has the right to know who is dealing with…So again we are not talking about extra regulations. We are talking about waht is right and fair but why is this not happening?

  4. Richard Proteau
    CEO and Founder Financial Services Consumer Alliance

    For those also who still have doubts, I would recommend that you study the case of Lemoine versus SFL/Desjardins. Lemoine stated that SFL when providing quotes to their advisors falsified the results to put Desjardins on top. Who do you think came under investigations? Lemoine did.Luckily for him the medias got interested in the case and the regulator dropped its investigation of lemoine. Lemoine won a lawsuit against SFL. Desajardins had to pay 400,000 fine but not for falsifying the quotes but because Desjardins did not disclose it owned SFL. Falsifying quotes is fraud and the regulator never investigated…The people who bought Desjardins and who were told that it was the best product and prices were never they had been lied to… This is why consumers have to be visible and vocal… http://investorvoice.ca/PI/1345.htm

  5. Ami Maishlish
    President, CompuOffice Software Inc.

    Richard, the CBC investigative report expose (Lemoine v SFL) to which you referred is not an isolated case nor limited to SFL. Years before that, the matter of predetermination of life insurance market survey results by some agents, done by intentional exclusion of available products from the data was brought to the attention of the Saskatchewan Insurance Council. They did nothing, nada and zilch. Granted, the Insurance Council of
    Saskatchewan dropped the ball when they bowed to pressure by a small group of agents who were recruited at the time to mount a letter writing campaign to defend the practice of pulling the wool over the eyes of consumers. Such manipulation by exclusion/suppression of available data to pre-determine so called comparison survey results continues to be practiced by some (hopefully very few) agents and marketing organizations.

    My advice to consumers would be to check multiple company surveys from other sources at the WinQuote site. Better yet, to consult with a LifeGuide-equipped professional and consumer-interest-oriented life insurance advisor, and to request a market survey produced with LifeGuide. LifeGuide’s focus is the best interest of consumers, and therefore includes numerous unique exclusive to LifeGuide consumer-interest functions – including facilities to identify opportunities that would otherwise likely be (and often are) missed without LifeGuide. Since LifeGuide’s focus is the best interest of consumers, it’s natural therefore that LifeGuide does NOT provide facilities for the user to artificially predetermine survey results by such means as artificial suppression of data

    (Note: For the benefit of consumers, market surveys produced using LifeGuide are clearly identified at the bottom of each page as having been produced using LifeGuide, and include the advisor’s name as well a unique QID serial number to confirm authenticity and deter forgery.)

    As to the CBC investigative report expose (Lemoine v SFL) to which you referred, I have a digitized copy of the 7-minute report and can supply you with it, if requested. The narrative is in French.

  6. Richard Proteau
    CEO and Founder Financial Services Consumer Alliance

    Amy, I have the CBC investigative report on Lemoine versus SFL. However I was unaware of the fraud in Saskatchewan, Do you have more information you can provide such as links…In the end, there is something rotten that is deeply rooted in the insurance industry which is unique to this industry which takes its source from insurer thinking they are above regulations and the law. I understand your advice but as a consumer, you are asking me to accept that forgery is an acceptable commercial practice in the insurance industry and I can’t. The consumer should not have to protect himself from forgery from licensed agents and insurers.Again, the fact that you have addressed this issue through Lifeguide through a unique QID demonstrate your dedication to what is right and to ethics. This however cannot become the acceptable solution. The solution is for insurers to respect the law and if they don’t; to prosecute the insurers.

    Again, lately I was reading the excerpts from a book on the insurance industry named Here lies your money, in it, its author Mr. Goodman stated:

    “the life insurance companies “bullying tactics” reaffirm the magnitude of the threat that life settlements pose to their reaping of untold profits.

    As I set out in Chapter 3, beginning in September 2010, Manulife employed similar tactics against me. And their arrogance and their bullying are further exemplified by this excerpt from a letter sent to me by Lester Heldsigner, a Manulife Vice-President:

    “Consequently you must no longer deal with any of the Company’s client in respect of the Company’s products. In the circumstances you will not be offered a Servicing Contract. New representatives will be assigned to service your clients.”

    In the same letter:

    “the company’s published business policies… prohibit the Company advisors from engaging in the described activitie… regardless of licensing, registration and legislation.”

    I cannot accept the last statement which represents the view of many executives in the insurance companies who believe they can operate regardless of legislation and as a result tell contracted advisors to act against the best interest of their clients regardless of legislation. The insurance industry needs a spring cleaning and such executives have to go…

  7. Randy McCord
    Risk Manager, Money Mentor and Private Equity Specialist

    Until the industry stops paying significant bonuses based on volume to MGA’s you will never stop the practice of biased representation. At National Best one of our mandates was to act as a true broker to the consumer. As a part of any quotation process, we train our advisors to present the client with a WinQuote or LifeGuide example and then let the client ask questions about the difference between the top 5 or 10 insurers. We then explain why we would pick a particular provider based on the list provided. In most cases, the premiums of the top 5 insurers are typically very competitive so it comes down to issues of underwriting or other benefits that we think the client will accrue. It is interesting to point out to clients that three companies all have identical premiums for the same product, and lo and behold, they are all owned by the same company. Imagine THAT! and you thought you were being serviced by an independent rep when you are provided those quotes. And I agree with Richard – quoting a UL at 10% and claiming that it is a retirement planning solution should be banned by law. Such illustrations are ludicrous given the fee structure of most contracts. In fact, UL’s with YRT based COI should be reserved for corporate accounts or for high net worth individuals and there should be a qualification KYC that must be completed before submission, much the same way we are required to fully vet our client’s appropriateness in the Exempt Market Industry. All that being said, we find it increasingly difficult to maintain some contracts with insurers if we do not provide quota. How can I act as a true broker if I cannot have a contract because I do not sell enough of one particular insurers product? We struggle with these issues every year and we take a pay cut in many cases to keep our independent status. An ombudsman for the industry is a good idea. I’m not sure if you have the answer Richard – or if it is even possible to ensure consumer choice in an industry as complex as ours, but any step in that direction would help everyone in the end.

  8. Richard Proteau
    CEO and Founder Financial Services Consumer Alliance

    Randy you are right on every point. In fact, we have now enough data to prove there is a direct link between infractions, frauds and sales volume/level of bonus. Data clearly shows that when an advisor has multiple insurer contracts (instead of one MGA contract) and therefore must meet multiple sales volume requirements, then the incidence of frauds and infractions increases significantly. For example, an advisor like Luc Deguire who had a direct contract with an insurer and MGA contract for other insurers wanted to qualify for 205% for both contract which would require him to do 250,000+ FYC for each contract. Since this is not sustainable, the advisor starts cutting corners and starts getting involved into rebating….I could list an enormous amount of advisors who have engaged in these practices but this is not the point or the forum to do it.
    There is a life insurance ombudsman but as for any ombudsman this is more for show than for results. My goal is simple and is to get the regulators to do their jobs independently from insurers and CHLIA. BC proposals regarding MGAs jeopardizes the independence of advisors and I believe strongly that consumers have a right to independent advice. BC proposals only profit the insurers.
    We have just started to operate and already we had a tremendous impact on insurers and the regulators. I have taken the regulators and insurers to Court for fraud. We have requested from the justice minister of the province involved the right to act as prosecutors (not a lot people know that but a citizen can request the right of a procurer if he does not a direct interest in a cause). We know we will not be successful but they still have to answer us legally and they know that their answer will come back to haunt them. And we are just starting… Being a trekkie, I would add: “Resistance is futile…” and time is on my side…

  9. Brian Shumak
    President Brian Shumak Financial Services

    @Randy & Richard,

    I must be missing something in the thread as I would be curious to find out why an advisor who goes through an MGA versus direct to a number of companies is an issue. In my situation, I go through an MGA so that all of my volume is bulked together so that my bonus is equitable across all companies. As a result, whether I place a case with company A or company B my bonus is the same so that removes the conflict of interest inherent in differential compensation and allows me to do right by the client independent of money which I would do regardless but the MGA route actually makes it a non-compensation issue.

    So again, please clarify why you believe that an MGA is a problem as all of the MGA’s that I have looked at or had inquire about me joining present the same picture of equitable bonusing independent of company

  10. Richard Proteau
    Richard Proteau
    CEO and Founder Financial Services Consumer Alliance

    Brian, what I have said is that my data proves that incidence of infractions and frauds increase with the number of contracts that an advisor has. So in your case this does not apply since you are going with an MGA and everything is pooled. But let assume now you decide that for one insurer to sign a contract directly outside of the MGA. Let’s assume you were a top insurance advisor with your MGA and you were getting 200% for 250,000 sales credits. Now to get a better bonus of 205% with the insurer you sign a direct contract and since your production is not pooled anymore, you will have to do another 250,000 sales credits to get your 205% with that insurer. So now you have to do 250,000 sales credits with your MGA and 250,000 sales credits with your direct insurer for a total of 500,000 (double what you had to do). So you can imagine the pressure here and yes producers will cut corners to achieve these sales goals. Lately there have been top advisors who had direct contracts and who were caught committing infractions to achieve their level of production. Please note this also applies also when an advisor has multiple MGA contracts…

  11. Brian Shumak
    President Brian Shumak Financial Services

    Ok, that would be different and in that situation, I agree there would be an inherent conflict of interest. It would suggest that it would make sense to have all of your business through an MGA thereby representing all companies or direct to one insurance company and represent them only. That I completely agree with. It would also be very important that an MGA not provide differential bonuses from company to company
    Like Reply privately Flag as inappropriate 17 hours ago

  12. Ami Maishlish
    President, CompuOffice Software Inc.

    There are some interesting and rather disturbing matters being discussed here, matters that I certainly hope and would like to assume relate to misconduct by only a minute percentage of insurance intermediaries. In my view the standard and the bar must be raised to the “best interests of the client” base line rather than the “suitability” standard. The “suitability” standard is far too low and inadequate to be acceptable, and I would argue that it conflicts or at best does not fully comply with the duty of the intermediary to put the client’s interests ahead of his/her own.

    The life insurance industry produces words and new interpretations to words on a consistent basis. “Life underwriter”, “broker”, “advisor” are just a few examples. I wonder, why are those labels not clearly defined for transparency? Is a life insurance intermediary electing to consider just the products of 3 companies, and artificially suppressing quotes of more competitive products while including products that are less competitive (so as to create the impression that the products that (s)he wants to sell are the most competitive) a “broker” or an “advisor” placing the client’s interests ahead of her/his own and acting in the best interests of the client?

    I would have no bone to pick about an intermediary quoting only the products of those companies for whom (s)he is able and wishes to sell, with a clear disclosure to the consumer that the products quoted were selected by the intermediary. Also, obviously, what may appear as the “cheapest” is not necessarily the “best” in terms of the client’s best interests in the circumstances; however, IMO, an intermediary should be able to and willing to clearly state and explain his/her reasoning for the advice rather than resort to “pulling the wool” over the consumer’s eyes through suppression of available information.

    I’ve seen a comment in an online ad that goes along the lines of claiming that some regulations PROHIBIT a life insurance intermediary from showing life insurance products of companies that (s)he is not contracted with to consumers. I’ve asked a good number of respected and well known life insurance professionals about this, and have also posted this question for any – even one – jurisdiction in North America where this would be true. All responses were in the negative. No one knew of a single jurisdiction for which that statement would be true. So, I’m using this opportunity to ask the question again: Does anyone know of ANY jurisdiction in North America where the regulations prohibit a life insurance agent, broker or advisor from showing anything to consumers about the products of insurance companies with whom the agent, advisor or broker doesn’t have a sales contract? (The question is about regulatory prohibition of disclosure to consumers and therefore regulatory prohibition of transparency or regulatory prohibition against acting in the best interests of consumers. The question is not about prohibition of selling the products of insurers that the intermediary is not contracted with) If anyone knows about such a prohibition – anywhere in North America – I’d certainly appreciate your input.

  13. Brian Shumak
    President Brian Shumak Financial Services


    I have never heard of such a prohibition. I do know that there are some companies where obtaining information on their products is difficult due to the captivity of their advisors but there is nothing that prohibits any advisor from commenting on anything. There may be liability in making a recommendation when not licensed (e.g. commenting on a mutual fund or stock if not licensed) but nothing that precludes one from commenting.

    I also think that, unless I am mistaken, it is already a requirement of advisors in Ontario to provide the consumer, in advance of any business transaction, a list of the companies that they deal with and the means by which they are compensated. With that being said, I have sat in many insurance meetings where such disclosure is being spoken about and have been the only one using a letter of engagement that speaks to that. And I was just at an all day meeting put on in the mutual fund world where the discussion was around CRM2 and the vast majority had no idea what it was all about.

    Moral of the story – there are many who hold themselves to a level of a fiduciary responsibility even though that is not a formal requirement. And, there are many who do not. Problem is that there are so many adjudicating bodies in existence all vying for the right to be the flavor of choice that the implementation is severely lacking.

  14. Ami Maishlish
    President, CompuOffice Software Inc.


    Thank you for your input. As noted in my earlier posting, no one has ever heard nor read about such a prohibition. Bluntly put, it appears to me that it’s just a fiction of the imagination of the online advertiser. Yes, there is a regulatory requirement of advisors in Ontario to provide the consumer, in advance of any business transaction, a list of the companies that they are contracted to deal with. That requirement has been in existence for many years and we included the facility in LifeGuide, named “Representation Disclosure” to facilitate compliance. Consumers, IMO, have a right to be provided with such disclosure, and without having to ask for it. Unfortunately, though, it appears to me that enforcement of that logical and common sense disclosure is at best lacking.

    In my view, as a consumer and from that perspective, disclosure of intermediary “commission” alone would be inadequate and potentially counter-productive and misleading. On the other hand, disclosure as a percentage and/or amount of the full “marketing and administration” loads, initial and ongoing (consisting of intermediary, wholesaler, and management commissions, salaries, allowances, etc, along with ongoing periodic loads such as MERs, admin fees, etc.) makes a whole lot of sense.

    By my observation, consumerism and consumer awareness, in general, is much greater in Israel than in North America. Financial regulators there are also notably better attuned to consumer interests and consumer protection than here. I visit Israel frequently and in one of my visits there I learned about a (then) new startup featuring the “Frier Meter” (“the word “frier” in Hebrew slang, roughly translates to the English word “sucker”). Their site is free for consumers and employs “social input” among other resources to gather stats. The service and information that can be gleaned from it is quite impressive. Their site in Israel is at: https://www.feex.co.il/ and it’s in Hebrew. More recently, they expanded to the US, where their site is at: https://www.feex.com/ (and it’s in English). Here is a link to a FOX Business interview with the founder and brief explanation of the idea and the free consumer education and awareness service. Worthwhile to watch: http://video.foxbusiness.com/v/3442376310001/robin-hood-of-fees-guards-investors/#sp=show-clips I’m lobbying them to launch a similar site for Canadal and look forward to visiting with them during my upcoming business and research trip to Israel later this fall. IMO consumers deserve to have such disclosure rather than just a potentially misleading “disclosure” of the intermediary “sales commissions” alone.

  15. Ami Maishlish
    President, CompuOffice Software Inc.

    In an earlier note, I stated my opinion about the “suitability” standard/benchmark being too low and urged for the adoption of the “best interest of the client” standard/benchmark instead.

    The following is a paste from an e-mail circular that I received by e-mail from IFBC (I elect to refer to IFBC by the full acronym of their name rather than just IFB which drops the “C” for “Canada” from the name for some unknown reason (What good reason is there for that association to drop reference to Canada?))

    Here is the relevant part of that e-mail, which suggests that even the rock-bottom “suitability” standard/benchmark is not being fully met:


    FSCO Product Suitability Survey shows Deficiencies in Compliance with Conflict of Interest Rules

    In the Fall of 2013, the Financial Services Commission of Ontario (FSCO) conducted a market conduct survey of 1,348 randomly selected life insurance agents. The survey gathered information on:

    i) the processes life insurance agents use at the point of sale to support suitable product recommendations;

    ii) the processes used to ensure consumers receive enough information so they can make informed decisions regarding the purchase of life insurance products; and,

    iii) how life insurance agents support the financial literacy of their clients.

    The results, although positive in many respects, highlighted some deficiencies in the current practices of some life insurance licensees. Specifically, 90% of agents reported they always disclose conflicts of interest, but only 50% do so in writing, as required by law.

    Shonna Neil, director of the Licensing Branch at FSCO, discussed these results at IFB’s Toronto Spring Summit in May 2014. Neil said: “It is the Superintendent’s expectation that all agents comply with the law and provide written disclosures of conflicts, or potential conflicts, of interest 100% of the time.” FSCO has indicated it is reviewing its next steps on this matter.

    IFB reminds you that since November 1, 2004, licensed agents/brokers in Ontario have been required by law to disclose actual and potential conflicts of interest to clients, and to do so in writing. Furthermore, licensees have a duty to reassess whether a conflict exists each time a recommendation or transaction is made. Some conflicts can be managed through disclosure and consent. Any conflict which prevents you from putting the client’s interest first should be avoided.
    [/end snip]

    As to the conflict of interest issue, there are too many insurance agent websites, and even the odd MGA websites that are configured to quote carriers so that the carriers that the agency wishes to pitch appear at the top, some carriers that the agency claims to represent are omitted whereas some carriers that the agency does not claim to represent but which quote higher prices than those that the agency wants to pitch are quoted. …all that while giving the impression to the unaware person that they are surveying the market and without any notation whatsoever to indicate that available information is suppressed. At the very least, and as a consumer, I’d expect a notation to inform the visitor that this is not a market survey but only a partial comparison among carriers selected for comparison by the site operator. Also, when available information about product alternative options is intentionally suppressed, the commission rates for the products that are being shown at the website should be disclosed.

  16. Richard Proteau
    CEO and Founder Financial Services Consumer Alliance
    Top Contributor

    Amy, this is indeed disturbing. Do you have the survey as I cannot find it. If you do can you send it at Richard_proteau@yahoo.com. Also have you ever read the 2005 CCIR survey on industry practices. What people don’t seem to perceive is that when CCIR does s survey, it give one voice per association and one voice for each insurer instead of one voice for the association for the insurer (CHLIA). As a result, since the insurers are for the status quo where they currently have the control over the industry, the voice of the insurance is over represented. It’s a bit like the ONU…This is one reason why these survey always conclude that everything is fine and dandy on the life insurance front…

  17. mi Maishlish
    President, CompuOffice Software Inc.

    I couldn’t locate the RESULTS of the survey either but just a brief Q&A about the survey (see http://www.fsco.gov.on.ca/en/insurance/Pages/2013-life-ins-agent-quest-faq.aspx)

    The IFB report about the report of the findings in the FSCO report suggests that a “clean up” is in order just to meet the bare minimum current standard of “suitability” (” Specifically, 90% of agents reported they always disclose conflicts of interest, but only 50% do so in writing, as required by law. “) On the basis of that statement, specifically, 10% of agents admitted that they don’t always disclose conflicts of interest, and only 50% (of the 90% that do or of the overall respondents?) do so in writing as required by law.

    Assuming that the number of agents in the sample was 1000+, then the findings would indicate that of those 100+ agents (10%) failed to (“always”) disclose conflict of interest. Yet, checking at the FSCO site http://www.fsco.gov.on.ca/en/insurance/enforcement/Pages/agents.aspx suggests that the EXISTING compliance requirements – even for these very basic aspects and the bare minimum standards – are not even being fully enforced.

    Consumers are penalized IMMEDIATELY once the consequences of incompetence, misleading presentations, skewed surveys, conflict of interest or worse are triggered. In such cases, innocent consumers have the option of just accepting the penalty for someone else’s misdeeds or suffering additional costs and aggravation by appeal to the judicial system. IMO, that is grossly unfair to consumers as well as to the industry as a whole and the majority of advisors who act professionally, honestly and with due care.

    There are more than enough regulations, regulators and regulatory tiers. What is needed is not more of the surplus but practical, fair and consumer interest oriented enforcement.

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