Insurers Welcome Introduction of '1200% Rule' for GAs... Expect Resolution of Exclusive Planner 'Preemptive Recruitment'

Recruitment of Exclusive Planners Rises, but Fierce Talent War with GAs Intensifies
Concerns Over Improper Replacement Contracts Stir Market Turbulence
Insurers Expect Advance Settlement Support Practices to Subside After Rule Implementation

The financial authorities have announced that the '1200% rule' will also be applied to insurance planners affiliated with corporate insurance agencies (GAs) starting in July. The insurance industry has unanimously welcomed this move, predicting that excessive competition to recruit planners will subside and that market disruption will decrease as a result.

According to the insurance industry on January 29, GA planners had previously been exempt from the 1200% rule, but starting in July, they will be subject to this regulation as well. Insurance companies expect that the practice of some GAs providing additional settlement support payments to planners to aggressively recruit talent will be curbed by this measure. The 1200% rule limits the sales commission paid to planners in their first year of recruitment to no more than 12 times the monthly insurance premium. Since GAs were previously exempt from this regulation, there had been a surge in planner turnover and improper replacement contracts, which had repeatedly undermined trust in the insurance market.

According to the Financial Supervisory Service's Financial Statistics Information System, as of the end of the third quarter last year, there were 212,046 exclusive planners at insurance companies. This represents a 31% increase compared to the third quarter of 2022, three years prior. The reason insurance companies have been striving to secure exclusive planners is that the profitability contribution of long-term protection-type insurance has increased following the introduction of the new International Financial Reporting Standards (IFRS17). With the change in accounting standards allowing the future profits of protection-type insurance to be reflected as the present value, known as the Contractual Service Margin (CSM), the more long-term products a company sells, the more advantageous it becomes. In other words, the market structure has shifted so that selling more long-term protection-type insurance products has a positive impact on the profitability of insurance companies. However, since only GAs were exempt from the regulation, insurance companies have struggled to retain their top planners.

In practice, major GAs have been aggressively recruiting planners in a preemptive manner. According to disclosures from the Korea Insurance Agency Association (Insurance GA Association), the settlement support payments at Inka Financial Service, the second largest GA in the industry, increased by 78.5% from 2.8427 billion won at the end of 2024 to 5.07452 billion won at the end of last year. For A Plus Asset, the third largest, the amount rose by 147.5% from 3.30512 billion won to 8.17942 billion won during the same period.

The advance payment rate also increased. For Inka Financial Service, it rose by 2.6 percentage points from 43.1% to 45.7% during this period, and for A Plus Asset, it jumped by 18.2 percentage points from 39.4% to 57.6%. The advance payment rate refers to the proportion of the total settlement support payments that a GA pays to planners in the following month.

Both insurance companies and GAs believe that the introduction of this regulation will ultimately help normalize the business environment. When experienced exclusive planners move to GAs due to overheated recruiting, insurance companies suffer losses in training costs and weakened sales competitiveness. In particular, when planners encourage existing clients to cancel their policies and sign up for new ones after switching jobs-a practice known as 'replacement contracts'-this leads to financial losses and reduced coverage for consumers. In effect, only the planners benefit from commissions, while insurance companies, GAs, and consumers all suffer losses.

An insurance industry official said, "Once the 1200% rule is applied to GAs starting in July, the practice of advance payment of settlement support based on financial strength will decrease. We expect this will help prevent the outflow of top talent and reduce improper recommendations to switch policies, thereby enhancing overall trust in the insurance market."

This content was produced with the assistance of AI translation services.