The sale of life insurance to a client by one agent through another agent may involve “ghosting.” This occurs when the actual life agent and the life agent of record are different. Ghosting is illegal, because the life agent is effectively unsupervised.
Ghosting arises in several circumstances:
1. If the agent is not licensed to sell any insurance, or that specific type of insurance.
2. If the agent does not have access to a product shelf that includes the product in question.
3. If the agent is not licensed in the jurisdiction (province) where the client resides.
In each case, the agent may be tempted to put the business through an agent who is licensed to complete that sale.
In this type of transaction of life insurance, the "referring" agent would expect to be compensated by the licensed agent, who in turn retains a portion of the commission. In short, the agent who provides the advice must be the agent of record.
Experienced agents know to be on the lookout for this activity. Typically, clients have suffered some form of loss. They consult an experienced agent. This agent notices that the agent of record identified in the documents is different than the person whom the clients identify as having given the advice. This mismatch illustrates that the insurer believes the intermediary to be different than the agent upon whom the client relied.
If this occurs, it should be promptly reported to the insurance regulator (in Ontario, that is the Financial Services Commission) and to the insurer who issued the policy. As the saying goes, there is rarely just one cockroach in a room. If it occurs to one client, it likely occurred to many clients.
If your client requires timely and effective legal advice from the experienced lawyers at MBC Law Professional Corporation, we are professionals who are already on your side. Contact Harold Geller or John Hollander toll-free at 1-888-288-2033 ext. 234 or by email.