Financial authorities have decided to reform the commission payment method for insurance sales, which is expected to reduce the income of insurance planners. The corporate insurance agency (GA) industry is opposing this, claiming it shifts the responsibility for excessive competition onto the planners.
On the 17th, financial authorities announced the direction of the reform of insurance sales commissions, centered on applying the '1200% rule' to GAs' planners. The 1200% rule sets the commission amount paid to planners within 1200% of the monthly premium for one year after an insurance contract is concluded. Until now, this applied only when insurance companies paid commissions to exclusive planners and GAs; it will now also apply when GAs pay commissions to their planners. This means that incomes of GA-affiliated planners will decline.
The proposal also includes a plan to distribute commissions over a maximum of seven years after the insurance contract. Planners have previously received their commissions in a lump sum within one to two years after signing. Financial authorities believe that if planners receive all commissions in a short period, there is no incentive to manage or maintain the contract, which leads to issues where customers are encouraged to switch to other products. To address this, the payment period for commissions has been extended to a maximum of seven years, encouraging planners to focus on contract management and maintenance during this period.
The GA industry opposes the reform plan. If commissions that could be received within one to two years after an insurance sale are distributed over seven years, income will decrease. If a contract is terminated in the third year, any subsequent commissions will disappear. The GA industry is concerned that planners facing financial difficulties may emerge.
A GA industry representative said, "After five years of an insurance contract, the contract retention rate drops below 50%" and noted, "If the contract is terminated, the planner will not receive commissions, resulting in anticipated income loss." One planner remarked, "Since insurance products are continuously developed, isn’t it right to suggest customers switch when better products come out?" adding, "Over time, the value of money decreases, so receiving all commissions over the long term actually results in a loss."
Regarding the proposal to disclose the commissions planners receive when recommending insurance to customers, there was a sharp reaction stating, "This is nonsense." Another planner stated, "When we buy a TV or refrigerator, do we disclose how much the store makes?" expressing that "the position of planners is not considered at all."
The GA industry argued that excessive competition should not be blamed on planners. A GA industry representative said, "They are not mentioning parts where financial authorities did not supervise and shifted responsibility for commission issues to the sales channel, resulting in reduced commissions," and questioned, "Isn’t there a suspicion that they are trying to guarantee the profits of insurers that first caused the excessive competition?"
The insurance industry shares some agreement with the commission reform plan, but they note that its actual effectiveness remains to be seen. This is because there are ways to bypass the regulations on commission payments. A representative example is when the 'second-year award' was created upon the initial introduction of the 1200% rule, allowing planners to maintain their income.
As the sales strategies of large GAs significantly influence the sales of insurance companies, they cannot completely ignore the demands of GAs for income preservation. An insurance industry representative stated, "There are many ways to circumvent the reform plan to pay commissions."