The Financial Services Commission and the Financial Supervisory Service announced on June 30 that improvements to the insurance sales commission system will take effect on July 1. This reform aims to curb excessive competition in advance commission payments and enhance consumer rights to information.
The so-called "1200% rule" will now apply to agents affiliated with GAs. This rule limits the first-year commission payment to 12 times the monthly premium for insurance policies. Previously, while this regulation applied to commissions paid by insurance companies to their exclusive agents or GAs, it did not extend to the commissions paid by GAs to their affiliated agents.
As a result, some GAs were able to pay commissions exceeding 12 times the monthly premium to their agents, leading to concerns about regulatory loopholes. Financial authorities believe that this expanded application will reduce regulatory discrepancies among sales channels and alleviate excessive commission competition.
The obligations for large GAs to compare and explain products will also be strengthened. Large GAs, which have more than 500 affiliated agents, must provide additional information on commission grades, rankings, and reasons for recommendations when comparing and explaining at least three similar products during the insurance contract process.
Commission grades will be categorized into five levels based on the average commission level of similar products: "very high," "high," "average," "low," and "very low." The commission ranking will display the recommended products in order of lowest commission, with the top rank being the product with the lowest commission.
Consumers will be able to verify commission-related information listed in the product comparison explanation document provided by the agent during the insurance enrollment process. If a desired insurance company's product is not included in the list of recommended companies, consumers can request that it be explained as well.
Following the implementation of these regulations, financial authorities will operate a "Sales Commission Reform Support Center" in collaboration with the Life Insurance Association, the Non-Life Insurance Association, and the Korea Insurance Agency. The support center will operate from July to December for six months, providing assistance with regulatory interpretation, reporting violations, and market monitoring.
* This article has been translated by AI.
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