Financial authorities plan to disclose insurance sales commission details next month

The financial authorities will finalize and announce a reform plan that includes disclosing the calculation details of insurance sales commissions and partitioning the payments over a maximum of seven years next month.

On the 31st, the Financial Services Commission and the Financial Supervisory Service held a briefing on the insurance sales commission reform plan at the Bank Hall in Myeongdong, Seoul, with over 180 employees from about 70 insurance companies and general insurance agents (GA), insurance planners, and representatives from life and non-life insurance and GA associations in attendance.

During the briefing, the financial authorities emphasized the need to disclose insurance sales commissions based on international standards and industry equity. The authorities noted, “The International Association of Insurance Supervisors (IAIS), which sets international standards, specifies the necessity of disclosing the commission structure due to potential conflicts of interest, and major countries have established supervisory systems corresponding to these principles.”

They pointed out that the commission rates for financial institution insurance agents, platform insurance comparison and recommendation services, and other fields within the insurance industry are transparently published, and various sectors in finance, such as commissions for loan agents, refinancing platform intermediaries, and fund sales commissions, also disclose their sales (recruitment) commissions.

The financial authorities explained that not only the financial sector but also the retail industry, including home shopping, department stores, large supermarkets, and online shopping malls, publicly release their sales commission rates each year.

Taking into account the opinions gathered during the briefing, the financial authorities plan to convene a working task force (TF) to discuss the details of the sales commission reform plan and hold an additional briefing next month to finalize and announce the plan.

The reform plan includes partitioning the payment of sales commissions to planners over a maximum of seven years and expanding the application of the '1200% rule' to general insurance agents (GA).

The Korea Institute of Finance and the Insurance Research Institute reported on the current status of sales commission operations in the country and international cases during the briefing. They noted that there is a negative perception of the insurance industry due to factors such as resentment towards recruitment commissions and poor contract management.