In the future, insurance companies with inadequate contract retention rates must submit plans for improving their contract retention rates to the financial authorities. The financial authorities plan to set contract retention rates as a major management indicator for supervising and inspecting insurance companies and to strengthen checks.
The Financial Supervisory Service announced on the 22nd a report titled 'Sales channel operational efficiency and supervisory direction for insurance companies.'
The financial authorities noted that while the short-term contract retention rates and the incomplete sales ratios have improved compared to the previous year for the past 1-2 years, the contract retention rate is still 20 percentage points lower than that of major foreign countries.
According to the FSS, the contract retention rates last year for life insurance and non-life insurance were 87.5% for 1 year, 69.2% for 2 years, 54.2% for 3 years, 50% for 4 years, and 46.3% for 5 years. This means that after 5 years of an insurance contract, 6 out of 10 individuals terminate their insurance contract.
To enhance contract retention rates, the financial authorities plan to include measures in the 'final reform plan for sales commissions' in the first half of this year that will impose limits on advance commission payments and introduce maintenance and management commissions that are paid in a partitioning manner over several years.
Starting in April of this year, as the sales ratio of bancassurance (selling insurance at banks) has been eased from the existing 25% to over 33%, there will also be new regulations requiring disclosure of sales proportions by partner insurance companies and strengthening the obligations for product comparison and explanation.
Last year, the incomplete sales ratio was 0.025%. Life insurance was recorded at 0.05%, and non-life insurance at 0.014%. The gap in the incomplete sales ratio between life insurance and non-life insurance narrowed from 0.111 percentage points in 2020 to 0.036 percentage points last year.
Last year, the retention rate of exclusive insurance agents was 52.4%, up 5.1 percentage points from the previous year (47.3%). The average monthly income per exclusive agent was 3.38 million won, which has continuously increased over the past three years. However, due to the expansion of sales in guarantee insurance, the average monthly income premium per recruiting contract per agent was reduced to 21.4 million won.