September 23, 2017




The Financial Services Consumer Alliance (FSCA) IS AN INFORMAL NATIONAL ALLIANCE of consumers and employees working in the financial industry SHARING THE SAME CONCERNS AND was created exclusively to defend and promote the specific rights and interests of consumers who have purchased a financial product offered by the insurance, mortgage, credit and investment industry.


The FSCA was created with the objective of breaking the censorship surrounding many regulatory issues existing in the financial industry by allowing those who work in the financial industry to contribute anonymously to better consumer protection in this industry without fear of reprisals or fear that their career would be negatively impacted.


The voice of FSCA is Richard Proteau, who was en executive in the insurance industry for more than 25 years. Richard Proteau is probably the only executive in the financial industry who has the absolute freedom to speak his mind without fear of legal reprisals as his freedom is not limited by any signed confidentiality agreement. As a result, he can without fear, use his experience and cases he was involved with as examples to illustrate the need to implement the regulatory changes needed to improve consumer protection in the financial industry. Richard Proteau is the first person who successfully tackled the issue of Orphan Policies in the insurance industry leading to a regulatory decision making these policies illegal in Quebec.


FSCA is now entering a second phase and intend to become more militant in regards to consumer protection. This is why we felt it was necessary to comment on the issue of the use of incentives to promote insurance sales. We are surprised that many incentives did not appear in this issue paper. Why is this? Clearly there is a gap somewhere in the analysis conducted by the AMF and we believe that this is a symptom of the censorship that exist in the insurance industry which allows this industry to hide the real issues that impact consumers.


FSCA has listed these issues in our response to the analysis conducted by the AMF in order to break down this censorship. It will be interesting to see how the AMF will respond. Will the AMF tried to hide our response or will it address it publicly? Time will tell…


Richard Proteau

Consumer Advocate


1)  Should other incentive categories be added to the list of incentives? Which ones?


a) Chargeback: We are surprised that no one mentioned the existence of Chargeback as a clear conflict of interest. When I was at Maritime Life, we had a very successful insurance agent, who was an industry icon, who used to sell big Universal Life policies named Performance Plan to the wealthy with premiums of $100,000+.


A year after the sale of these policies, the associate of this agent would call me at Maritime Life requesting a special quote and solution in order to save the policy from lapsing. The first time I was surprised. I could not understand why a client would cancel his policy after only one year if the agent had done his job properly. When this happened continuously, I became concerned. When I look into it, I found out that this agent owed more than $1,000,000 in commission chargeback to Maritime Life. It was clear that this agent was selling the Performance Plan, one of the Universal Life paying the highest commission in the industry, to create a credit against his chargeback in a stratagem that we could describe as rolling his chargeback forward.


There was no reasons for him to sale Performance Plan. This YRT cost of insurance product was the least competitive product in the industry. It did not offer an option to switch to level COI, an option that all other insurers offered in their YRT product. The only thing that Performance Plan offered was the highest front-end commission and this provided the perfect solution to pay back his chargeback if he could convince his wealthy clients to buy this product and pay the premium for 2 years (outside of the chargeback period).


It is clear that the existence of the chargeback influenced the insurer and product recommendation made by this agent. This is a clear conflict of interest. If this agent had been located and doing business in Quebec, the insurer and agent would have been in violation of the Law on the distribution of financial products and services.


Another example, this time in Quebec, involves the biggest insurance fraudster in this province. We won’t tell the story of Jacques-André Thibault again in this document but we do have to point how Thibault had a chargeback in the six figures with BMO and the handling of this debt by BMO and the special favors provided to Thibault. This had a negative impact on the clients and consumers involved. The existence of this chargeback was again a conflict of interest which BMO and its CEO Peter McCarthy used to get more business from Thibault.


Is there a solution to this conflict of interest?


We proposed that for any representative who has a chargeback that is greater than 10% of his previous year commission income or greater than $10,000, that:


1) The insurer must report this agent to the AMF which would allow the AMF to decide whether or not this agent should become a priority case going to the top of list of those who need to be audited,


2) That the agent be required to disclose to the client the existence of this chargeback in order to warn the client that the advice he is receiving in not objective because of the existence of this conflict of interest.


b) Achievement program: Manulife has a distribution channel which is called the Direct Channel which caters to independent/autonomous representatives. This channel uses a program named the Master Builder; a program to recognize and honor advisors who achieve consistent levels of production with Manulife. This program, a remnant of the Manulife branch/career, offers great sale and VALUABLE incentives to advisors. In a career system, where a representative is an employee and sell insurance under the name of the insurance company, there would be no problem is recognizing the achievement and career of an employee through monetary incentives.


The problem is that the Direct Channel is known as the Independent Agent Channel catering to those advisors who promote themselves as being independent/autonomous. Rewards and incentives of this program are not disclosed to the client when they constitute a conflict of interest.


In the end, while an insurer should be able to use Achievement Programs to recognize the work of advisors, such program should be adapted and structured based on the distribution context. If a representative is independent, he cannot participate in a career designed program. His achievement program should be based on customer-value programs such as preferred customer service access…. and not based on monetary value. Finally Manulife should make any incentives associated with these programs public which it is not. It is impossible for a consumer to go on Manulife website and verify what his representative gets by being a Master Builder.


c) Commission retro activity and freeze: This is an enormous and valuable incentive paid by insurer to advisors which is not disclosed to the consumer. While the base commission is the same for all advisors, the bonus commission (which can be between 100% to 210% of base commission) vary by advisors and is paid based on a commission grid where the determinant is the amount of sales made by the advisor.


For example, let’s assume that an advisor has qualified for a bonus of 130% based on a sales volume of $40,000 base commission. If this advisor makes and reaches $50,000 base commission, his bonus will increase to 150%. Already a perceived conflict of interest exists. Is the advisor acting for the good of his client or is he making a sale, selecting a product…. in order to qualify for this 150%.


The problem is that this conflict of interest is magnified by the insurer where the difference in commission between 130% and 150% will be RETROACTIVELY paid to the advisor TO THE FIRST DOLLAR. This is 20% of the 40,000 which is $8,000.


On top of this, the 150% will be frozen for the next year. If the advisor only makes $30,000 base commission next year qualifying for only 110% bonus; he will still get 150% and his profit will be 40% of $30,000 which is $12,000.


In the end, commission bonus were designed to attract the business of advisors by influencing them through the use of monetary incentives. While we believe that commission bonus should disappear in favor of higher base commission and service commission as it is a major source of conflict of interest, we believe that on the short term this would be impossible. However we believe strongly that commission bonus retro activity should be banned IMMEDIATELY.


COMMENT ON BONUS COMMISSION: We are informing the AMF that most insurers mislead consumers with the disclosure commission page associated with their illustration software. It is possible for an advisor when doing an illustration to print a commission page. This commission page only shows the base commission and not the bonus commission which constitutes an infraction. The law requires full disclosure and not partial disclosure.


d) Insurer Servicing contracts: Companies such as Manulife and Great West Life cancels the sales contract of an advisor who is not doing enough business or because an advisor has ceased to do busines with this company. What is particularly worrisome is that the offer of a Service Contract is not automatic in these conditions. Without such service contract, the advisor would cease to have access to the information of his clients in regards to the insurance policies owned by his clients despite the fact that the insurer would continue to list this advisor as the servicing advisor. The client would receive no notice of this change and would remain unaware that his advisor is unable to service him.
We have documented evidence involving Manulife proving that in such situations, the advisors, in order to protect his commission income, will recommend that his clients cancel and replace life insurance policies or transfer funds to another insurer in the case of seg funds without the client being aware of the real reason behind this advice.


The withholding of a servicing contract by an insurer without any valid reasons based on compliance (for example the advisor is not the subject of a complaint or investigation by AMF/CHAMBRE) can be used by the insurer to force the advisor to place a minimum amount of business with them. Again this is wrong because such sales would only be in the interest of the insurer and advisor and NOT in the interest of the client.


e) Orphan clients: Clients who have no servicing representatives are called Orphan Clients. The existence of Orphan Clients as per the AMF memo is illegal in Quebec. All life policies in Quebec have to be serviced by a representative holding a valid license.


Such clients, in Quebec, have to be assigned to a new licensed representative automatically by the insurer or by the previous representative who is no longer licensed. The existence of a conflict of interest will depend whether or not the servicing commission is vested with the original selling agent.


1) Commission vested with original selling agent: In this case, the insurer is asking the licensed representative to offer the orphan client services where no remuneration will be paid. We believe this is wrong. Representatives should be paid for the work they do. If they are not paid for the service they provide they will have to found another way to get paid and this often means tied selling whereby the licensed representative will offer to take on for free the service of the orphan policy on the condition that the orphan client open for example a new investment account or transfer an existing investment account to the licensed representative where the licensed representative will receive new commission on what will be a new sale.


Vested commission should be illegal. Service commission should always be provided to the licensed representative who is providing the service. This is how it is done in the Mutual Fund industry and this is how it should be done in the insurance industry.


2) When the commission is not vested, the AMF should make it clear to the insurer that assigning orphan cases to a licensed representative on the condition that such representative put a minimum amount of sales with the insurer is illegal.


e) Insurer Special Quote Program: A special quote involves the modification of a product on an individual case in order to improve the advisor and insurer’s chance to win the sale. This special quote can include changes such as a decrease in commission in order to improve cash surrender value, decreasing or increasing surrender charges, jumbo cases… At Maritime Life, I led the Special Quote Team to record sales level contributing more than 20% to Maritime Life total life insurance sales. In all cases, we have never offer special quotes on the condition of an advisor achieving a certain amount of sales. All cases were reviewed on their own merit on an individual basis. However it would have been easy to add the condition of a sales volume to get more sales for Maritime Life. This would have been wrong and would have put the representative in a conflict of interest. The AMF should ensure that all insurers understand this by communicating that it will not tolerate the use of special quotes as a sales incentives.


f) MGA Selling Contracts: An MGA is an independent intermediary used by the representative to place business with multiple insurers. It is the MGA who signs a master contract with the Insurer and the representative upon selling a product of the insurer is added to the Master contract as an Annex A upon being accepted by the insurer.


To keep a selling contract, a MGA must place a minimum amount of sales with the insurer usually 500,000 sales credit (base commission). When I was at Manulife, many MGAs could not place that amount of sales. To keep their sales contract with the insurer, the MGA would buy the sales business of representatives by offering very generous sales incentives such as sharing the 3% service fee on the inforce business paid by the insurer to the MGA. The other MGA who is facing the risk of losing the sales of this representative would then tried to top this offer leading to a commission bidding war. This clearly demonstrates the pressure that the MGA is under to meet its sales quotas.


There are many conflicts of interest associated with the MGA’s insurer contracts. For example if an MGA has a 10 insurer contracts with a minimum of $500,0000 each for a total of $5,000,000 sales credits, the MGA will use every influences it has on the representative to switch the sales of the representative to another insurer once the minimum with an insurer is filled. Losing an insurer contract for an MGA can lead to many representatives leaving the MGA and as a result the MGA will do anything it can to protect itself including using strategies that result in conflicts of interest.


2) Which details could be added to the descriptions of the various incentive categories?


The interaction between commission and bonus has an amplifying effect on conflicts of interest. It explains why we still see today Permanent Life Insurance policy such as Universal Life sold with small face amount which does not cover the need for insurance over term insurance. Such cases are very common. The last case where I had to intervene was when one of my representatives replaced a Universal Life contract sold by a Desjardins representative. The single mom with one child was sold a Universal Life policy of $30,000 face amount for a premium that she could not afford when a term policy for $300,000 with a lower premium would have been more appropriate. I had to intervene because of the Desjardin’s threat to make a complaint against my representative if the policy was replaced. This threat was unacceptable.


This case illustrates how big commission can influence the representative in selling an inappropriate product. A term policy pays 30% of premium. A Universal Life policy pay up to 65%. This is a 35% difference. However we must multiply this by the bonus. If the bonus is 150%, this difference becomes close to 53%. This is a lot of money. The insurer wins because it gets more premium for less risk. If the insured dies the insurer has to pay only $30,000 and not $300,000. Our recommendation is simple. Selling the wrong product and face amount is a practice that has to be stopped. As a result, it should be mandatory for the representative to submit a need analysis upon submission of an application. The AMF should audit insurers ensuring that a life policy is only issued if a need analysis has been submitted by the representative.


Huge up front commission paid to representatives on product such as Universal Life influence representatives in recommending that the client pays large amount of premiums over a short time period. There is a lot more commission for the representative if he convinces the client to pay $10,000 for 5 years rather then pay $5000 over 10 years. How many people must lose their money before this practice ceases? When I was at Berkshire, I saw many examples of insurance agents poaching the clients of our mutual funds advisors to convince them to transfer their investment into a Universal Life such as this client in Nova Scotia where the Berkshire advisor had worked with the client for 10 years in building a $70,000 unregistered reserve fund. An Industrial Life agent convince the client that dumping the full $70,000 into a Universal Life policy was the best thing to do if he loved his family. Two years later, the full $70,000 was gone and the policy lapsed…


3) In your opinion, does the risk assessment presented in this document by incentive category adequately reflect conflict of interest risk? If your answer is “no,” explain why.


Distribution Channel Context is missing. One of the main source of conflicts of interest are the representations made to the consumer by the representative. There are two licenses and class of representative. The representative can be autonomous (or attached to his own autonomous firm where he is the principal) or can be attached to a firm and selling under the name of the firm (the firm owning the block of business).


The consumer would expect that an autonomous agent is acting independently and free from any influences from any insurers. As a result, any incentives provided to the representative to convince him to place business with the insurer instead of with another insurer is a conflict of interest and the best example is the Direct Channel of Manulife where representatives are influenced in signing a direct contract with Manulife for the purpose of contracting their business with Manulife in exchange for a high level of incentives that will not be disclosed to the client.


However this conflict (except for the situation described with Cooperators) does not exist with a representative who is attached such as a London Life representative. The consumer knows that the London Life representative has no other choice but to place his business with London Life. The consumer accepts this restriction because he wants to deal with a representative who is supervised and monitor at a greater level by the insurer and where continuity of service is guaranteed. In this situation, the only conflict of interest in relation with incentives would happen only at the product level and not at the distribution level if London Life was for example offering special incentives to sell a specific product.


As we shall see in several examples below, to reduce conflicts of interest, the use of the term “Independent “ should be restricted to representatives who are autonomous and these representatives should be held to higher ethical standards in regards to conflicts of interest compared to a representative who is attached to an insurer.


We also support the idea that a representative can only be autonomous only after a certain period of time (for example 5 years) after passing an additional test on compliance and law since they are responsible for their own compliance contrary to an attached agent where the insurer will have a compliance officer who is responsible to monitor the activities of an insurance branch.


4) What other criteria could be considered to assess the risk of conflict of interest in relation to incentives?


The term independent is freely used by many firms to describe their attached representatives. Also many firms try to give the impression that their attached representatives can act independently and objectively when providing financial advice.


For example, in 2010, I applied for a position as Sales Director with Cooperators. I asked a lot of questions about how Cooperators operated in order to ascertain whether or not I was going to find myself in the same position that I had been with Manulife where I had to take a stand against the existence of conflicts of interest.


When Cooperators answered my questions, they informed me that their representatives had access to products of other insurers through an MGA they owned in order to promote the idea that Cooperator representatives had access to all and best products available in the market. When they described to me the representative contract of this MGA, I was surprised to learn that if the Cooperator representative sold the product of another insurer through the MGA, no bonus would be paid to the representative compared to if he had sold a product manufactured by Cooperators. The representative would also not receive any points towards getting other incentives such as attending their annual sales conference in an exotic location. This is a major and ARTIFICIAL difference in incentives between selling the life product of an insurer versus a product of Cooperators.


Clearly the only reason for Cooperators to pay less when the representative sell the insurance product of another insurer is to influence them to sell Cooperators products instead. This is illegal and a clear conflict of interest. Please note that if the position of Sales Director had been in Quebec I would have withdrawn my application. However it was for the Maritimes where there are no legal provisions unlike Quebec applying to conflicts of interest.


Another firm which uses the term “independent “ is Investors Group. Investors marketing gives the impression that the consumer will be dealing with an independent advisor which is absolutely untrue. The only independence that an Investors Group representative has is in regards to the cost of his employment status where he is responsible to cover his own expenses for the work he is doing as an Investor Group representative. In this regard, he is an independent contractor and not an independent advisor or representative.


The Investors Group representative can only sell the products of insurers contracted by Investors Group under a National Contract which in the past only included 3 or four insurers. The Investors Group representatives cannot contract an insurer outside of this national contract and this is not disclosed to the consumer and can have a severe impact on the consumer as seen in a case in PEI where the Investors Group representative had sold a smoker policy to someone who was smoking cigars when the same client could have gotten a non smoker policy with Standard Life which considered people smoking cigars as non-smoker. Working at Berkshire and having access to all insurers, I replace the policy saving more than $7,000 in annual premium to the client. In the end, what made the client upset the most is that he believed his Investors Group representative was independent which clearly is not the truth.


The term independent should be a term reserved to autonomous representatives who have demonstrated that they can act independently on their own, independently from any insurers, free from any influences from any insurers and who demonstrated a sufficient knowledge of ethics and compliance to have earned the privilege to do business this way.


5) What mechanisms do you have or plan to set up to mitigate the risk of conflict of interest in relation to incentives: (a) During the design and marketing of products? (b) During after- sales follow-up?


Sadly in my career in the insurance industry I have not seen any mechanisms implemented by insurers to reduce the potential of conflicts of interest.


For example, let’s look at recruitment and production levels which determines incentives levels. Let’s compare two firms in Quebec; one that still exists today Herb Braley Group operated by Herb Braley and another firm that does not exist today which is the Empreza Group which was operated by Luc Deguire.


What was the difference between the two groups? The Herb Braley Group is a business and as a result Herb Braley was growing a business while Empreza was only a producer group created in order to grow sales through the pooling of commission allowing Empreza to qualify to the highest bonus possible with many insurers through the signing of direct contracts with these insurers.


Growing a business, Herb Braley invested heavily in the support and compliance of his group. In fact, I always laughed when stating that Herb Braley had 600% more staff than I had to support 12 producers compared to me who had to support and monitor more than 2000 producers at Manulife.


The existence of producer groups created with the sole purpose of getting more commission always lead to disastrous results as shown in the Deguire case. It leads to conflicts of interest and the employment of illegal sales strategies such as rebating. The insurer knows this and still allows the existence of these producers groups. When warned, years ahead of Deguire being caught, such as what happened at Manulife, most insurers like Manulife will look the other way in order to get the sales.


In order to reduce the negative impact of these producers group on the industry, we propose:


  1. A special license and education requirement (as in a Branch Manager for Mutual Fund) for the principal of the group and,
  2. The requirement of a compliance officer position with the group to monitor sales of the producers.


When I was recruited as Sales Director with Manulife for the province of Quebec, I was living in Nova Scotia. I had been working in the insurance industry for 20 years  and I had a tremendous experience in all area of the insurance industry except one area, Quebec Law. I had been trained in regards to insurance law by Maritime Life and I had to pass a course on the Uniform Life Insurance Act that applies is some form in most of the provinces of Canada except for Quebec.


When I moved to Quebec to take the position of Sales Director, there was no requirements for me to learn about the Quebec Law pertaining to the distribution of financial products and services. Manulife did not provide any training. It is only because I was life insurance licensed in Nova Scotia and decided to transfer this license despite the objections of Manulife, that I had to take and pass a course on Quebec law. It is the only reason why I learned how the law was different in Quebec. A few years later, I recruited an employee working in the Customer Service department of Manulife to become a Marketing Sales Representative; a path towards becoming a future sales director. I had to fight with Manulife to have her becoming life licensed as a condition of future employment because she had no knowledge of anything associated with life sales including legislation and compliance. Becoming licensed was the only solution I had at my disposal to give her the knowledge she needed to supervise representatives in accordance with legislation.


So basically insurers can employ anyone to supervise the activities of representatives when these Sales Directors can employ sales strategies that basically break the law; putting the representative in a conflict of interest; without having any knowledge they are breaking the law. Without access to training, It took me years to understand the whole law and understand for example that in Quebec, calling a representative to discuss that he only needed 10,000 more sales credits to qualify to a beautiful trip to an exotic country disguised as a conference was illegal because I was asking him to sell insurance to his clients not based on their needs but based on wanting to have a free trip.


When I finally audited the Quebec operations of Manulfie, I discovered that Manulife had operated the Direct Channel in Quebec in contravention of Quebec law for more than 20 years leading to my decision to leave the company. The cause of this situation was clear:


  1. Poor knowledge of Quebec executives such as Guy Couture in Quebec about distribution and legislation in Quebec which continues today with Guy Couture publicly threatening autonomous representatives in Quebec with the cancellation of their contract if they act in the best interest of their clients and against the best interest of Manulife if they recommend that their client enter into a life settlement which is a legal option in Quebec.
  2. Poor knowledge and racism of English executives in Toronto who wants Manulife operations to be uniformed across Canada even if this means breaking the law in Quebec. How many times did I have to sit and hear the sentence “ Quebecers always have to be different” just because I was telling an English executive that I would not break the law in Quebec.


Being a Sales Director should be a licensed activity where the Sales Director should be able to demonstrate that he has at least the same qualifications and understanding of the law than a regular representative. This is the minimum. Sales Directors should be the subject of minimum compliance continuing education requirements because of their influence over representatives and the sales process.


6) Do your policies and procedures prohibit certain incentives deemed at high risk of conflict of interest? Please describe these incentives.


  1. Incentives that promote the sales of certain products versus other products
  2. Any direct incentives such as Shares buying program
  3. Career recognition program targeting autonomous/independent representatives.


7) Do you establish maximum thresholds for the overall incentives to be paid to an intermediary? Please provide examples.


A bonus table usually will have a maximum threshold of 205% for bonus based usually on doing $500,000 base commission. The problem is that this threshold should only be available to a MGA (which will have in most cases difficulties in reaching this threshold).However insurers are willing to offer it to an individual representative. A single representative cannot sustain on an individual basis this type of production and this is when we start seeing such representative forcing a sale or paying a sale through rebating. It forces representatives into producers group which are often not contractual but informal just for the goal of pooling business raising concern about confidentiality and protection of information. It is our view that such pooling arrangements should be banned. They don’t exist in any other industry. If the representative does not want to use a MGA and want to contract directly with an insurer, he should do so under his own individual contract and not under a pooled arrangement where no one will be monitoring and ensuring that such arrangement remains compliant. Basically under such pooling arrangement the representative can establish a corporate arrangement outside of the MGA channel and outside of current regulations and supervision.


8) Have you formalized specific criteria for sales contest awards in order to mitigate their risk of conflict of interest? If so, please specify what these criteria are.


During my career I have not seen any insurers employing any form of strategies to mitigate the risk of conflicts of interest with sales contest. In fact, the opposite happens as these sales contests are used to influence the representative in selling more by reminding him often how close he is to qualifying and therefore getting a free trip….


9) Do you have mechanisms in place to foster transparency in the disclosure of incentives to consumers? If so, please explain what they are?


I have seen no processes employed by insurers to foster transparency and disclosure of incentives. On all illustration software, it is possible for the representative to print a commission page which can be shown to the client. This commission page only list the base commission and not the bonus/override. This is in contravention to CHLIA illustrations standards but insurers still try to prevent the disclosure of bonus commission to the consumer.


10) For incentive categories deemed at high risk, do you think that mitigation measures could reduce the risk to an acceptable level? Please elaborate.


Basic changes can be put in place to mitigate the risk of conflicts of interest. This will not happen through self regulation and the AMF must play a leadership role in this area. We have already provided some suggestions as to the changes that need to occur.


11) Do you think that the accumulation of incentives could present an increased risk of conflict of


Yes as disccused above.


12) Given the consultations under way in the securities sector,6 do you believe that the “` insurance sector (overall or in certain subsectors) faces the same issues? Please develop and support your answer with examples and facts.


No comment.


13)Do you believe that incentives create a competitive imbalance between insurers of different sizes or, as regards investment products, between the insurance sector and the securities sector? Explain your answer.


Competitive imbalance would directly occur as explained in our example using Cooperators when a manufacturer directly controls a MGA and decides to flow less commission to its representatives if they do business with another insurer instead of selling the manufacturer’s products turning the MGA into a facade to mislead the consumer in believing that the representative have objectively reviewed all products prior recommending a product of Cooperators.


Imbalance also occurs with direct contracts. For example, a representative makes in average $500,000 base commission per year with a MGA and his business is spread across 5 insurers getting 195% as bonus. Manulife offers him a direct contract where Manulife will pay a bonus of 205% on this 500,000 base commission therefore buying the business of the advisor. The 205% commission is the same level that the MGA receives from Manulife. The MGA cannot compete against Manulife and match this offer. When the representative leaves the MGA, the MGA must now replace the production of this representative or risk losing one of the insurer contract. At this point this is a matter of survival for the MGA and it will risk a lot even breaking the law to survive. As a result, by offering a direct contract to this representative, Manulife has disrupted the sales of this representative with other insurers by buying the business of the representative and the MGA must now replace the sales that this representative used to do with Manulife through the MGA with sales from other representatives or be punished by Manulife. As a result, the MGA to protect his Manulife contract may decide to convince its representatives to switch business from a smaller insurer to Manulife since from a business perspective, if an insurance contracted has to come into jeopardy, losing the contract of the smaller insurer would have less impact on the business.


14) Do you believe that current incentive programs prevent product offerings that are more advantageous and less costly for consumers? Please explain your answer.


Absolutely. The current incentive program prevents the establishment of level commission product which represents better value to the consumer reducing the risk of conflict of interest.


15) In your opinion, which method of remuneration would most adequately mitigate conflict of interest risk? In line with the Framework for Cooperative Market Conduct Supervision in Canada of the Canadian Council of Insurance Regulators (CCIR), which is intended to foster greater collaboration and information sharing in the supervisory of market conduct risk in the insurance industry, CCIR members are interested in knowing whether the findings presented in this document could vary from other Canadian provinces.


Levelized commission and disappearance of bonus would most adequately mitigate conflict of interest risk.


16) Do you think that the incentives listed in this document are consistent across the provinces in which


When I was at Manulife, the decision at the highest level was that Manulife would operate in the same way in all provinces based on Ontario Insurance Act even if this meant breaking the law in other provinces. This is fully documented in written evidence in my possession and even confirmed in writing by the legal council representing Manulife. While the Ontario Insurance Act has small differences with other English provinces, it has larges differences with Quebec. Sadly it seems that Manulife is too big to break the law…



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