South Korea is set to shift insurance sales commissions away from heavy upfront payments, with part of remuneration to be paid over as long as seven years to encourage ongoing policy servicing and reduce churn.
The Financial Services Commission said it approved amendments to the Insurance Business Supervisory Regulations on 14 January, finalising a package that also expands disclosure and tightens controls on the budgeting and payment of commissions.
The move follows concerns that competition centred on commissions has intensified since IFRS 17 reduced insurers’ initial strain from expensing acquisition costs, raising questions about premium levels and financial soundness.
Regulators also pointed to weak persistency, noting Korea’s 25-month policy retention rate of 69.2%, compared with figures above 89% in markets such as Japan, Taiwan, Singapore, and the U.S.
Under the overhaul, a new “maintenance management” commission will be introduced and paid in instalments for up to seven years, but only if the policy remains in force, with additional long-term maintenance payments in policy years five to seven.
To reduce regulatory arbitrage, the so-called “1,200% rule” will be expanded to commissions paid by general agencies (GAs) to their affiliated agents, with the cap also applied to other payments, such as settlement support and incentive commissions, when calculating limits.
The commission arbitrage prohibition period will also be extended from one year to the full policy term.
On transparency, the authorities plan to publish comparable commission information by product category on insurance association websites, including the split between upfront and maintenance commissions. Large GAs with 500 or more agents will be required to provide customers with a list of partner insurers’ products and explain the recommended product’s commission “grade” and ranking on a five-step scale.
The reforms also strengthen insurers’ product committees, which will review areas such as expense loadings, profitability analysis, and misselling risks, and can pause or stop sales where products are deemed inappropriate. Regulators cited a sharp rise in total recruitment commissions from 10 trillion won in 2020 to 32 trillion won in 2025.
Implementation will be phased in, with disclosure measures, stronger product-committee functions, and the longer arbitrage ban due from March 2026, followed by the GA-related cap extension and enhanced explanation duties from July 2026. Split payment of agents’ sales commissions is set to begin in January 2027, starting with a four-year split in 2027–2028 before moving to a seven-year split from January 2029.
