Sources Of Agent Misconduct

There are nine sources of agent misconduct.

  1. commission splitting
  2. conflicts of interest
  3. fraud
  4. holding out
  5. misrepresentation
  6. money laundering
  7. replacement
  8. tied selling
  9. unfair trade practices

Errors & Omissions insurance helps protect you.

Commission Splitting

  • can only share commissions with other licensed agents in Ontario and some other provinces
  • can pay a finder's fee
    • fixed amount per prospect
  • can pay a consulting fee for services received
    • fixed amount per hour of consultation or per case

Conflicts of Interest

  • definition: the interests of the advisor take precedence over the interests of the client
  • could affect your advisor's judgment or advice → advisor discloses all actual or potential conflicts


Click here.

Holding Out

Relates to how agents present themselves to the general public

  • need a license to sell insurance
  • requirements regarding advertising, letterhead, business cards, etc
  • before you sign an application, the CLHIA requires that you can request

Your advisor must generally disclose

  • the name of the insurer
  • that the agent will receive compensation from the insurer (no need to disclose the amount)
  • names of all insurers and other financial service providers represented
  • how to cancel a policy contract


Click here.

The advisor

  • can't misrepresent the terms or advantages of the policy contract
  • can’t advertise sales success

Money Laundering

Click here


Replacement means surrendering all or part of a policy contract you already own to buy another policy. This is permitted, provided your advisor first makes sure that

  • replacement is in your best interest
  • the new policy has not been misrepresented
  • both the old and new policy contracts have been compared fairly and completely
  • you are given a standard disclosure form comparing both policies
    • after you sign this form, your advisor must send a copy to the insurer of the old policy within three business days

These rules help prevent your advisor from

  • churning: replacing coverage with new coverage from the same insurer
  • twisting: replacing coverage with new coverage from another insurer

when the advisor's primary motivation is to earn new compensation.

The replacement rules may not apply when

  • the new policy is from the same insurer (sometimes called an "internal replacement")
  • the original policy is an annuity
  • the original policy is creditor insurance
  • switching between individual and group coverage

Be sure to keep your original policy in force until the new policy is issued.

Tied Selling

  • prohibited
  • e.g., bank can’t require you to buy life insurance from them as a condition of getting a mortgage

Unfair Trade Practices

There are three forms

  1. coercion (undue influence) to
    • make the sale
    • intimidate you from taking an action to which you're legally entitled
    • threaten you to prevent you from lodging a complaint
  2. rebating premium to you
    • your advisor cannot
      • offer to pay some or all of your premium
      • use a gift or promotion to encourage you to buy
        • inexpensive gifts like a pen or calendar are fine if they are not contingent on a purchase
    • rules may vary outside of Ontario

This brief summary cannot capture the variations for

  • different designations
  • different jurisdictions

This is primarily for residents of Ontario, Canada.

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