Starting in July, first-year recruitment commissions paid to planners affiliated with corporate insurance agencies (GA·General Agency) cannot exceed 12 times (1,200%) the monthly premium. For example, if they sell a product with a monthly premium of 100,000 won, the first-year commission can be up to 1.2 million won.
The Financial Services Commission and the Financial Supervisory Service said on the 30th that they will implement the "plan to improve the insurance sales commission system" starting July 1. As a follow-up to the revision of the Insurance Business Supervision Regulations approved in Jan., the move is aimed at correcting the practice of upfront payments and easing overheating in the sales market.
The core is the expansion of the "1,200% rule" coverage. Until now, the cap applied only to commissions paid by insurers to captive planners or GAs, and there was no limit on commissions GAs paid to their affiliated planners, allowing high payouts. Authorities expect this measure to eliminate regulatory arbitrage between sales channels and reduce excessive competition.
Disclosure requirements for large GAs will also be strengthened. GAs with 500 or more planners must explain to consumers the commission grade, the commission ranking among recommended products, and the reason for the recommendation when selling products. The goal is to make it easier for consumers to understand why a planner recommended a particular product.
Commission grades are divided into five levels from "very high" to "very low," based on the level relative to the average of similar products. The commission ranking among recommended products is also presented. After checking the list of recommended insurers, consumers can request additional explanations if the insurer they want is missing.
Authorities, together with the life and General Insurance Association of Korea and the Insurance Agents Association, plan to operate a "support center for implementing the commission reform" through the end of the year to assist with interpreting the rules and reporting violations. They will conduct intensive inspections of regulatory circumvention, such as unconventional commission payments, and strictly sanction serious violations. In addition, the installment payment system, which pays planners' commissions spread over several years, is scheduled to take effect in Jan. next year.