Insurance Sales Commissions to Be Paid Over 7 Years... 1200% Rule Extended to GA Agents

Financial Services Commission Regular Meeting
Approves Amendment to Insurance Business Supervisory Regulations

Starting next year, insurance product sales commissions for insurance agents will be paid in installments over four years for two years. From 2029, the payment period will be extended to seven years.

The Financial Services Commission announced on January 14 that it had approved a revision to the insurance business supervisory regulations regarding the restructuring of insurance product sales commissions at its regular meeting.

The Financial Services Commission stated that, under the new system, a maintenance commission paid in installments over up to seven years will be introduced. This measure was taken in response to repeated criticism that the majority of commissions were paid in advance, leading agents to neglect ongoing maintenance of insurance contracts. Moving forward, in addition to the existing upfront commission, a new maintenance commission will only be paid if the insurance contract is maintained.

An official from the Financial Services Commission explained, "From January next year, the four-year installment payment will be implemented for two years, and from January 2029, the seven-year installment payment will be introduced." In addition, a long-term maintenance commission will be paid in the fifth to seventh years of contract maintenance, so that the longer an agent maintains a contract, the higher the total commission they can receive. The commission amount will increase in proportion to the duration the contract is maintained by the agent.

The "1200% rule" will be extended to corporate insurance agencies (GA). Starting in July, the 1200% rule will apply to commissions paid to agents affiliated with GAs. Previously, the rule was only applied to commissions paid from insurance companies to GA agencies. The 1200% rule limits the total commission an agent can receive in the first year after signing an insurance contract to no more than 12 times the monthly premium.

To prevent agents from engaging in arbitrage due to excessive upfront commissions, the arbitrage ban period will be extended from the current one year to the entire duration of the insurance contract.

A new requirement has also been introduced for comparing and disclosing insurance sales commission information. Starting in March, sales commission rates by insurance product category must be compared and disclosed on the Insurance Association's website. The breakdown between upfront and maintenance commissions will also be disclosed in detail.

GAs with more than 500 agents will be required to provide consumers with a list of affiliated insurance company products when selling products. They will also be required to explain the commission grade and ranking of recommended products.

The role of the insurance company’s product committee will also be strengthened to function as a control tower overseeing the entire process from product development to sales.

The product committee will consist of executives responsible for products, compliance officers, and executives in charge of financial consumer protection. The committee will deliberate and decide on overall product operation plans, including the appropriateness of business expense levels, profitability analysis, and the risk of misselling.

Additionally, limits have been set so that both upfront and maintenance commissions paid by insurance companies to agents are paid within the contract acquisition costs designated for commission payments during product design.

A Financial Services Commission official stated, "We expect this commission restructuring to normalize insurance contract retention rates," adding, "Consumer harm from unfair policy replacements will decrease, and agents will find it easier to secure stable income."

The official further added, "Insurance companies and GAs are also expected to benefit from improved agent retention rates and greater stability in sales channels as contract retention rates rise."