At the 6th session of the Insurance Reform Conference held on January 21, 2025, the Financial Services Commission (“FSC”) and the Financial Supervisory Service (“FSS”) announced measures to strengthen the sales responsibility of general agencies (“GA(s)”), intended to prevent mis-selling and protect financial consumers. The main elements of the newly announced measures were as follows:
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1. |
Enhanced Oversight by Insurance Companies |
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Insurance companies must establish standards for the appointment and evaluation of GAs that are aligned with the international standards set by the International Association of Insurance Supervisors, and appoint their GAs and conduct annual evaluations of them based on such standards.
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The financial supervisory authorities will establish a new “Operational Risk Assessment System for GAs” to evaluate the insurance companies’ risk management of their GAs. Under the new assessment system, the regulatory authorities will assess, among other things, the policy retention ratio, mis-selling ratio, and the insurers’ commission policies applicable to their GAs. Insurance companies that receive poor assessment results will be required to have additional capital.
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2. |
Enhanced Internal Controls and Sales Responsibility for GAs |
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The GAs must establish internal control policies to manage the operation of its branches, including regarding the appointment or dismissal of sales agents, commissions policies and prevention of mis-selling.
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The GAs must maintain a compliance department subject to the following minimum staffing requirements, based on their size:
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GA Classification |
Minimum Compliance Support Personnel |
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Mega-scale GAs (more than 3,000 insurance agents) |
Five or more |
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Large-scale GAs |
1,000 - 3,000 insurance agents |
Three or more |
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500 - 1,000 insurance agents |
Two or more |
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Mid-scale GAs (100 - 500 insurance agents) |
n/a |
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To ensure the GAs’ ability to fulfill their indemnification obligations, the new minimum guarantee reserves requirements will be imposed based on the size of the GAs, with the maximum amount being increased to KRW 500 million.
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3. |
Amended Enforcement Measures |
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Administrative fines will be introduced as a new enforcement measure against the GAs, replacing the existing business suspension penalty, in order to protect the interests of compliant insurance agents belonging to the GAs that breached the applicable rules.
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Transfer of policies between GAs intended to avoid sanctions will be prohibited.
The supervisory authorities have announced that they will proceed with formal amendments to the Insurance Business Act and subordinate regulations, reflecting the foregoing proposals, during the second half of this year.
