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Compliance | Fronting


Recently, a few insurance companies have sent out notifications regarding the termination of a contracted advisor with unacceptable broker activity.

This raises a topic which is seldom discussed but an important part of advisor best practices. Fronting, as defined below could result in the immediate termination of an advisors license.

There are two kinds of Fronting:

  1. The Advisor submits an application on behalf of another licensed person who is not authorized to represent the insurer.
  2. The Advisor submits an application on behalf of an unlicensed person.

Below is a sample of a communication from an insurer regarding such a practice.

We thank you for your continued support of Equitable Life and our product offerings. As one of our valued partners, we believe it is important to keep you informed of any activity that is not acceptable to our company.

An advisor named ______________ may approach your office or your advisors. Should this advisor contact you to request a broker contract with us, it will not be accepted. Also, please ensure to the best of your ability that none of your brokers attempt to process business on his behalf. He has approached numerous advisors to submit business or ‘share’ commissions.

Please remind your advisors of their client and carrier disclosure obligations, and the requirements regarding commission splitting and referral fees. If more than one advisor is involved in a sale, all advisor names and codes must be recorded on the Applications. An advisor must not submit an Application on behalf of a person who is not authorized to represent our company.

Below is a sample of Manulife’s policy as well as the rationale behind not allowing this practice.

Manulife Policy

Manulife advisors are prohibited from engaging in the practice of fronting. In circumstances where more than one Manulife advisor has participated in making representations to a client in a particular sale, both advisors’ names and codes should be recorded on the application in the space provided. Manulife advisors must ensure that any other individual who is representing a Manulife product to their client is life insurance licensed and authorized to represent Manulife.


– Possible fraudulent misrepresentation by agent to principal (Manulife) and probable misrepresentation and failure of fulfillment of professional duties to the client
– Possible breach of client’s privacy and confidentiality
– Possible breach of duty to act in the client’s best interest
– Possible breach of statutory prohibitions against the payment of commissions to an unlicensed agent and acting as an agent while unlicensed
– Possible creation of a false statement or falsifying witness statement
– Breach of Manulife Producer’s Code of Conduct


Breach of this policy will result in a referral to the Manulife Producer Concerns Committee for consideration of disciplinary and remedial action, including possible termination of the Advisor’s authority to sell insurance on behalf of Manulife and the Advisor may be reported to Regulators for consideration of further disciplinary action. Costs related to remediation of contracts or settlement costs paid to a client may be charged to the Advisor.

Insurers and regulators are keeping a close eye on this kind of conduct. In the past this has resulted in advisors losing their license, or acquiring substantial charge backs and client liability for fraudulent acts.

The advisor is 100% liable once his or her name and code appears on the application.

True Story:

An advisor accumulated $27,000 in charge backs due to fronting.

The arrangement was a 75/25% split and approximately $20,000 was paid by the advisor to the individual who sold the policy. The advisor was unable to recoup this amount and he was required to pay the full $27,000 back to the insurance company. The advisor’s contract was terminated by the insurer and he was reported to the regulators.

It’s just not worth it! Protect your livelihood.

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