On January 15, 2026, the Financial Services Commission (the “FSC”) issued an advance notice of legislation and regulatory revisions regarding the proposed amendments to the Enforcement Decree of the Insurance Business Act and the Insurance Business Supervisory Regulations (the “Proposed Amendments”).
The Proposed Amendments (i) stipulate the standards for the introduction of the fifth-generation indemnity health insurance products, (ii) introduce the core capital solvency ratio as the regulatory standard for insurers’ financial soundness, and (iii) enhance the accountability of sales channels.
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Establishing Product Design Standards for Introduction of Fifth-Generation Indemnity Insurance Products
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While indemnity insurance functions as a critical private safety net for the public, ongoing issues such as induced excessive medical usage and steep premium hikes have been consistently raised. To enhance the fairness of the indemnity system, a comprehensive restructuring of the indemnity insurance system has been discussed. Consequently, existing products are expected to transition toward more appropriate coverage—focusing on general and critical care medical expenses:
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For covered outpatient expenses, the co-payment rate will be linked with the National Health Insurance system to bolster the policy effectiveness of the public health cost-sharing framework. For covered inpatient care, the co-payment rate will remain at 20% (consistent with the fourth generation), considering that these cases often involve severe illnesses with a lower risk of manipulation.
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Riders for non-reimbursable medical expenses will be split into critical and non-critical categories. Coverage for critical non-covered care will be strengthened—including the introduction of a maximum out-of-pocket ceiling—while coverage for non-critical care will be reduced to diminish incentives for excessive medical service consumption.
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Enhancing Accountability of Sales Channels
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As the Korean insurance industry has increasingly separated product development from distribution, corporate insurance agencies (General Agencies, “GAs”) have become the dominant sales channel. While GAs play a positive role in expanding consumer choice, concerns over side effects—such as mis-selling and abuse of dominant position—have been persistently raised.
The Proposed Amendments reflect these views and introduce measures from various perspectives to enhance the accountability of insurance sales channels, including (i) establishing an internal control system, (ii) securing the effectiveness of sanctions, and (iii) expanding information disclosure.
Key measures Include:
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Requiring GA headquarters to establish comprehensive branch management frameworks and detailed procedures to ensure strict adherence to internal control standards.
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Increasing the required operating deposits (performance bonds) for GAs to strengthen their indemnity capabilities, with amounts calculated based on the scale of the agency.
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Strictly prohibiting the transfer of insurance contracts for the purpose of evading regulatory sanctions or penalties.
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Adding contract retention rates to the insurance solicitor information provided directly to consumers through subscription forms and insurance policies, thereby empowering consumer decision making.
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Meanwhile, the Proposed Amendments will eliminate regulatory blind spots for corporate insurance brokers, whose market scale has been expanding with a focus on general non-life insurance, by establishing specific internal control operational guidelines and expand public disclosure items by applying the disclosure cases of large GAs.
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Introducing Regulations for Tier 1 Capital
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Tier 1 capital refers to items within an insurer’s available capital that possess high loss-absorption capacity, such as capital stock and retained earnings. Since the introduction of a new solvency regime—the Korea Insurance Capital Standard (the “K-ICS”) system in 2023—insurers have increasingly relied on subordinated bond issuance for capital management, while the Tier 1 capital ratio has received relatively less attention.
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To remedy these issues, measures have been proposed to strengthen the framework by making Tier 1 capital a mandatory compliance standard.
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Others
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The scope for simplified explanations in telemarketing (“TM”) insurance sales will be expanded. This initiative follows a recommendation from the fifth Financial Regulatory Ombudsman in 2025. It is expected to address inefficiencies caused by unilateral faceless explanations, which currently take approximately 40 minutes to one hour.
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Revisions to laws and regulations will also be pursued to establish sound solicitation practices, such as specifying the standards for similar contracts used in a comparative guidance system designed to prevent unfair contract switching.
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The Proposed Amendments are scheduled to be finalized in the first half of 2026 after undergoing procedures such as public notice of legislation, regulatory changes, reviews by the Regulatory Reform Committee and the Ministry of Government Legislation, and resolutions by the Vice-Ministers’ Meeting and the Cabinet Meeting. Regarding the Detailed Enforcement Rules of the Insurance Business Supervision Regulations, which contain the specific details, communication and inspection meetings within the insurance sector will continue to ensure the amendment process is completed within the same period. Accordingly, insurers, GAs and other stakeholders should closely review the forthcoming changes to the framework ahead of the enforcement of the Proposed Amendments and prepare to conduct business in compliance with applicable laws and regulations.
[Korean Version]
