The financial authorities and the corporate insurance agency (GA) industry will resume official discussions on the commission reform plan for insurance agents in the afternoon of the 28th. The GA industry opposed the commission reform plan proposed by the financial authorities and declared that it would not participate in any discussions starting on the 24th, while preparing collective actions such as rallies and protests.
However, the GA industry rapidly shifted towards a consensus on a compromise proposal. The GA industry is expected to argue for the phased implementation of the '7-year distribution' system, where insurance agents receive commissions spread over 7 years. They are also expected to discuss alternatives to the system that reveals the amount of commission an agent receives upon signing a contract.
According to the insurance industry, the Financial Services Commission and the GA industry will begin discussions on the commission reform plan starting today. This comes four days after the GA industry announced it would not participate in any discussions. The GA industry was scheduled to hold a rally and protest against the commission reform plan on the 30th in front of the Korea Deposit Insurance Corporation in Jung-gu, Seoul. The scheduled date of the protest on the 30th is also the day the financial authorities are set to hold a briefing on the commission reform plan.
As the GA industry reaffirms its call for a compromise agreement, discussions on the commission reform plan have gained momentum. The financial authorities also plan to actively review the compromise proposal put forth by the GA industry. Kim Byeong-hwan, chairman of the Financial Services Commission, noted during a full meeting of the National Assembly's Strategy and Finance Committee that "agents believe that under the commission reform plan, they would incur an average loss of 700,000 won per month" and added, "We will continue to engage in dialogue with the GA industry."
The GA industry is expected to advocate for the stepwise implementation of the 7-year distribution system with grace and guidance periods. Until now, agents received their commissions within 3 years after signing contracts. In contrast, the financial authorities determined that when agents receive short-term payments of commissions, it contributes to a decline in contract retention rates. If an agent receives all the commissions within 3 years, they may be encouraged to terminate existing contracts and switch to new products to continue receiving commissions. The contract retention rate in the 3rd year, when the commission prepayment period ends, is less than 50%.
On the other hand, the GA industry anticipates that the implementation of the 7-year distribution system will reduce agents' income. If an insurance policyholder terminates their contract in the 3rd year after signing, the remaining 4 years' worth of commissions cannot be received. Agents expressed resistance against the implementation of procedures that impede their ability to recommend policies when better options are available.
There will also be discussions on alternatives to replace the proposal for disclosing agents' commission. The GA industry has been arguing for clearer disclosures of business expenses, including new contract commissions paid to agents, rather than revealing the commissions themselves. They oppose the financial authorities' reform plan, stating that no entity discloses how much revenue salespeople earn each time they sell a product or service.
The key issue is whether the financial authorities will accept the GA industry's compromise proposal. A GA industry official said, "Even on the 25th, the possibility of collective action was very high," but added, "Since discussions have resumed, we must wait to see the outcome." A financial authorities official stated, "As there are diverse opinions being presented from various sources regarding the commission reform plan, we plan to consolidate these opinions and derive a proposal."