FSRA fines intermediary $800K for fraudulent life insurance applications

The Financial Services Regulatory Authority of Ontario (FSRA) has fined a small life insurance intermediary $800,000 for submitting false information in life insurance applications. The regulator also ordered an independent review of the company’s compliance system as a condition for licensing.

Concord, Ont.–based Specialty Life Inc., an Empire Life subsidiary since December 2025, admitted that, between 2019 and 2023, it placed with insurers 6,500 fraudulent applications for life insurance policies, the regulator said. The applications had been submitted to Specialty by managing general agents (MGAs) with which it was subcontracted and independent life agents. The company later learned that the information in the applications was false or misleading.

Specialty “has since made fundamental changes to its business model and compliance function,” a release from FSRA said. The company has about 105 licensed life agents on staff, and no longer uses MGAs or third-party life agents to distribute insurance, a notice of proposal said.

Initially a lead-generation company, Specialty didn’t put adequate systems in place to sufficiently protect against fraud as the company evolved, the notice said. Speciality had “limited compliance staff and compliance leadership with little or no experience in insurance compliance.”

As part of its business model, Specialty maintained a VIP program with selected MGAs and agents, paying commissions and bonuses of up to 200% of a policy’s premium within 24 hours of receiving a policy application, it said.

Specialty “paid out significant amounts in commissions and bonuses on the applications,” the notice said. Premiums were paid to Specialty on the fraudulent policies to “maintain the scheme.”

In determining the $800,000 penalty, the regulator considered the extent of harm or potential harm, among other criteria. Specialty’s conduct has “the potential to harm public confidence in the regulatory regime,” the notice said. “The nature of the fraudulent activity, coupled with [Specialty]’s failure to detect and prevent it, calls into question the efficacy of having licensed entities as intermediaries and the credibility of the sector.”

As a condition of licensing, the regulator ordered that Specialty retain an independent monitor to review its compliance system, including policies, procedures and staffing.

The notice said Specialty has taken legal action against the agents responsible for the fraudulent applications.

Specialty was previously a subsidiary of Concord, Ont.–based Insurance Supermarket International Inc., and FSRA also ordered that Insurance Supermarket can’t acquire a majority interest in any MGA, third-party administrator or other insurance intermediary in Ontario or operate as such itself.

Last December, Empire Life acquired an 80% stake in Specialty, at a cost of less than $35,000, including goodwill, according to Empire’s 2025 annual report.

FSRA’s latest proposal for a licensing regime for MGAs, released last October and aimed at improved oversight within the life insurance sector, defined MGAs broadly. Any entity involved in the recruiting, screening, training or oversight of life agents would be required to apply for a licence, even if they were already licensed as an agent or corporate agent.

While the proposed regime was targeted for June 1 of this year with a proposed two-year transition period, it has been temporarily paused. Work on the proposal to clarify its definitions is expected to resume, but no timeline has been established.