Fool Me Once …
Rick Forchuk, MBA, CFP, CLU, CH.F.C.
Vice-President, Retail Insurance Distribution
Empire Life
TM
Trademark of The Empire Life Insurance Company. Policies are issued by The Empire Life Insurance Company.
The Way the Globe Sees It:
(May 08, 2012) by Tara Parkins
and Grant Robertson
Middlemen working in Canada's life insurance industry need more oversight, the
country's insurance regulators say.
The Canadian Council of Insurance Regulators, an umbrella group that includes
the major industry watchdogs, is placing the onus for improvement on regulators
themselves, as well as on the country's life insurers.
At issue are middlemen known as managing general agencies, or MGAs, which are
essentially wholesalers of insurance policies. A Globe and Mail investigation in
2010 detailed how MGAs have flourished in the past decade, a dramatic shift in
the industry that had not yet been dealt with in regulations.
Following a lengthy study, the regulatory umbrella group has now identified holes
in the system's ability to protect consumers, and is making concrete
recommendations to provincial regulators to close them.
The study found that regulators do not know enough about this part of the industry,
and need to be better informed about the players in it.
2
The Way the Globe Sees It:
(May 08, 2012) by Tara Parkins
and Grant Robertson (cont’d).
•
•
•
In the 1980s, most insurance agents had a contract with the company
whose policies they sold. But a massive transformation has since ensued,
and today most agents are independent and can sell policies from multiple
insurers.
Companies such as Manulife Financial Corp. are increasingly dealing with
a vast array of independent agents who are not their full-time employees.
MGAs sprang up to help with the training, paperwork and back-office
support involved in the new arrangements, taking on such functions
themselves and linking insurers to agents.
The Globe investigation found that at least 44 per cent of new life
insurance policies being sold to individuals across the country go through
MGAs, but regulators were still grappling with the fact that the chain of
oversight between insurers and agents had been broken.
3
The Way the Globe Sees It:
(May 08, 2012 (cont’d). by Tara Parkins
and Grant Robertson (cont’d).
The CCIR report, which has just been released, makes recommendations that will
now be considered by provincial regulators. CCIR cannot enforce its recommendations,
and it will be up to each jurisdiction to decide whether it wants to enact new policies
or legislation.
The report cites a number of potential problems with the new system. For example,
it says that there might be deficiencies in the way insurers monitor and assess the
MGAs with which they work, and that some contracts between insurers and MGAs
are too vague.
It also says that regulators must be more involved in the oversight.
"Regulators need to be better informed - not only about insurers and the MGAs with
whom they contract - but also about who are the insurance agents licensed in a
particular jurisdiction, what is their business model, and how many of these licensed
agents are performing functions that fit the definition of an MGA," the report says.
4
The Way the CLHIA Sees It:
Letters to the Editor, Tuesday,
May 10, 2012
Middlemen
I disagree with your article Watchdog Urges Greater Oversight Of Insurance Middlemen
(Report on Business, May 8), which states that regulators have determined that there are
"holes in the system's ability to protect consumers.“
The report found no consumer protection risks that would warrant changes to the
present regulatory regime - where insurers are responsible to policyholders through
binding contracts and for oversight of their agents; further, all agents, including
middlemen known as managing general agencies, are licensed through provincial
regulatory authorities.
The report did recommend refinements to strengthen and standardize existing practices;
as an industry, we are committed to improving systems.
Consumers are well protected.
•
•
•
•
Frank Swedlove
President, Canadian Life and Health Insurance Association
© 2012 The Globe and Mail Inc. All Rights Reserved.
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… and what the late Dave Billington had to say about it …
“… so you’re worried about what the paper said about
you and your company. Let’s do the math:
First off, half the newspaper readers in town don’t
even take The Sun. There are 450,000 newspaper
homes, so you’re really worried about half of those, or
225,000.
Second, of the half who take this paper, half of them
didn’t read it that day, so you’re really worried about
112,500 people.
Dave Billington
1935 - 1987
Third, of the half who read the paper that day, only
half of them read anything more than the front page
and the sports section … so you’re really worried
about 56,250 people..”
7
“Fourth, out of the half who read something more than the
front page and the sports, only half of them even saw the
page your story was on. So you’re worried about 28,125
people.
Fifth, out of the half who saw your page, only half of them
even looked at the article. So you’re really worried about
14,062 people.
Sixth, out of the half who looked at the article, only half of
them decided to read it. So you’re really worried about
7,031 people.
Dave Billington
1935 - 1987
Statistically, half the people who look at an article don’t go
beyond the headline, so you’re really worried about just 3,515
people.
8
“Seventh, out of the half who read beyond the headline,
half of them had no understanding of what they were
reading … so you’re really worried about 1,758 people.
Eighth, out of the half who read and understood, only half
of them cared about what they read. So you’re really
worried about 879 people.
Ninth, out of the half who cared, half of them didn’t agree
with what they read. So you’re really worried about just
439 people.
Dave Billington
1935 - 1987
Tenth, out of the half who agreed, only half of them really
cared. So you’re really worried about 219 people. And out
of that group, half won’t remember what they read an hour
from now. So you’re really worried about just 109 people.”
9
“Out of the half who remember more than an hour, half of
them won’t recall anything 24 hours later, which means you
are really worried about 54 people … half of whom have no
retention beyond 48 hours, so you’re really worried about
27 people.
We are now 72 hours into the piece, and half of those left
don’t remember what they read. So you’re really worried
about 13 people, half of whom stopped caring about it at
hour 36. So you’re really worried about 6 people.
Out of the six, half will change their opinions about what
they read, so you’re really worried about three people.
Frankly, I don’t care … so that leaves you and they guy
who started all of this. So what the hell are you worrying
about?”
Dave Billington
1935 - 1987
10
Fool Me Once …
Rick Forchuk, MBA, CFP, CLU, CH.F.C.
Vice-President, Retail Insurance Distribution
Empire Life
TM
Trademark of The Empire Life Insurance Company. Policies are issued by The Empire Life Insurance Company.