Who is involved when you buy life insurance?

Whether you already have insurance or you’re looking for coverage, you may need help understanding the various players in the industry. Here’s a handy guide, mostly related to life and health insurance.

Insurer. An insurer is a company that creates policies to take on risks (death or illness, for example) in return for premium payments. Insurance companies are regulated at the federal, provincial and territorial levels.

Client. A client is a current or prospective insurance policyholder. Clients may also include other policy beneficiaries and claimants with a legitimate interest in a policy.

Life agent (captive versus independent). A life agent sells life insurance and must have passed a life insurance program and be licensed by the relevant provincial or territorial regulator. (More generally, “agents” sell various types of insurance.)

Career agents, also known as exclusive or captive agents, are employees of a specific insurer and sell only that insurer’s products, for a commission. These agents can also be self-employed with an exclusive agreement with the insurer.

Independent agents can sell insurance from several insurers (also for commission). They generally place their business through managing general agents (see below), which review applications, submit them to insurers, and collect and allocate premiums.

Managing general agent (MGA). MGAs are intermediaries between agents and insurers. MGAs process business submitted by agents and facilitate communication between insurers and agents. Insurers can delegate oversight functions to MGAs, including the screening, training and monitoring of agents.

Medical professionals. A life insurance application may require a doctor’s statement if the person whose life is being insured (the “life insured,” who isn’t necessarily the client as defined above) has a specific medical issue. The insurance company pays any fees the doctor charges for preparing an attending physician’s statement, which is sent directly to the insurer. The statement includes a summary of the life insured’s medical history, description of current health and treatments, and prognosis for ongoing issues.

If the insurer still has concerns about the life insured’s health, the insurer may ask for a medical exam. The exam could include fluid tests, electrocardiograms or other tests. The insurer will pay for these tests.

Claims for accident and sickness insurance may require detailed medical evidence from a doctor. Clients are expected to reasonably assist in their rehabilitation and comply with requests for medical evidence. The insurer will typically cover these costs.

Regulators and client protection. As noted above, life agents are licensed by provincial and territorial authorities. Provincial and territorial insurance legislation requires insurance companies to be financially sound and for life agents to demonstrate fair, responsible and professional conduct.

Provincial and territorial insurance regulators promote transparency to clients, enforce breaches of conduct, provide access to complaint services and equip clients with financial knowledge through consumer education campaigns. 

The OmbudService for Life and Health Insurance is an independent national complaint resolution service to help clients with complaints related to life and health insurance.

Assuris is a non-profit organization that protects policyholders if a life and health insurance company becomes insolvent. Regulators require these insurers to be Assuris members, and a policyholder is automatically protected up to a certain amount or percentage of policy benefit, whichever is higher.

Sources: Publications from the Canadian Insurance Regulatory Organizations and the Financial Services Regulatory Authority of Ontario

---