If the "1,200% rule," which caps first-year commissions for insurance planners affiliated with corporate insurance agencies (GA · General Agency) at up to 1,200% of the monthly premium, is implemented, there are projections that planners will leave small GAs in large numbers. There are also expectations in the industry that expedients to keep planners from leaving will run rampant.
According to the insurance industry on the 13th, a system limiting first-year commissions paid by GAs to their affiliated planners to 1,200% of the monthly premium will take effect starting in Jul. next year. When the deferred commission payment system is implemented in 2029, planners will have to receive the remaining commissions over three to seven years.
Typically, insurance planners receive a total commission equal to 2,000% of the monthly premium. If they sell a product with a monthly premium of 100,000 won, the first-year commission cannot exceed 1.2 million won, and the remaining commission will be paid over up to seven years. Previously, planners affiliated with GAs received the full 2,000% commission lumped into one to two years.
Currently, the 1,200% rule applies only to commissions that insurers pay to GAs. It is not a problem if a GA adds a separate commission from its own resources and pays it to planners. Large GAs with 500 or more planners have expanded by paying large settlement support payments as "scout expense," backed by their capital strength.
Large GAs with 500 or more planners increased from 57 in 2019, when the 1,200% rule was first implemented, to 73 last year. During the same period, GAs with 3,000 or more planners rose from 14 to 21, and those with 5,000 or more increased from 8 to 13. In response, small GAs recruited planners by offering to pay higher commissions than large GAs.
Once the 1,200% rule is implemented, it will be harder for large GAs to recruit planners with large settlement support payments. But it will also become difficult for small GAs to pay higher commissions. If commissions are equalized, observers say planners are more likely to choose large GAs with well-established training and support systems.
Within the GA industry, there is a view that even if the 1,200% rule is implemented, small GAs will use various expedients to prevent planners from leaving. This is because small GAs have weak internal controls, and it is hard for outsiders to detect violations.
A GA industry official said, "There are many ways to circumvent the 1,200% rule, and it is not easy to catch every small shop one by one," and added, "When the 1,200% rule was first introduced, there were also many tricks."
Violating the 1,200% rule makes you a target for intensive inspections by the financial authorities. If problems are found during an intensive inspection, administrative sanctions can range from a minimum of institutional caution to a maximum business suspension.