Amendment to Insurance Business Supervisory Regulations for Sales Commissions Reform

The financial supervisory authorities announced the "Plan to Reform Insurance Sales Commissions" to address the increased business expenses and payment of large upfront sales commissions, which has prevailed since the introduction of IRFS 17, and promote higher policy retention rates and sales commissions transparency. To that end, on June 13, 2025, the financial supervisory authorities announced amendments to the Insurance Business Supervisory Regulations, which include (i) a policy maintenance fee requirement, (ii) application of the 1200% rule to agents of GAs, (iii) specification of the role and operational requirements of product committees, and (iv) expansion of the scope of the product comparison/explanation requirements of large GAs. The key contents of the new amendments are as follows:

Policy Maintenance Fees and Ceiling on Upfront Sales Commissions

Insurers will be required to pay a monthly maintenance fee for outstanding policies (up to the first seven years of the policy), and a long-term maintenance fee for policies retained for three years or longer.
Upfront sales commissions may not exceed the amount of policy execution expenses set at the time of designing the policy.

2.	Application of 1200% Rule to Agents of GAs The 1200% rule will now apply to agents of GAs, who previously were exempted from the requirement.

3.	Specification of the Role and Operation of Product Committees Insurance companies must establish a product committee, which shall ensure the validity of basic policy documents and any amendments thereof.

Expanded Scope of Product Comparison/Explanation Requirement for Large Scale GAs

Agents of large scale GAs, which are required to explain and compare other identical or similar insurance products, will be required to (i) provide a list of all available insurers, (ii) include products offered by any insurers selected by the customer in the scope of their product explanation/comparison, and (iii) in recommending a specific product, explain the reasons for the recommendation and (iv) disclose the level of the relevant commissions (indicating five grades).

Comments on these proposed amendments may be submitted by July 23, 2025. The amendments are expected to be finalized by the third quarter of this year, after review by the Regulatory Reform Committee, the Ministry of Government Legislation, the Vice Ministers' meeting and Cabinet resolution. The amendments relating to sales commissions will, however, become effective after a grace period, in light of the impact of the proposed changes on insurance companies, GAs, and their agents.

[Korean Version]

Share

Professionals

Professionals