Kyobo Life chair calls spread-commission rule a chance to fix life insurance industry's 'money game'

Shin Chang-jae, chief executive and board chairman of Kyobo Life, said the introduction of a spread-payment system for insurance agent sales commissions should serve as an opportunity to restore an industry he described as having degenerated into a "money game."

Speaking at the company's 68th anniversary ceremony Friday at the Kyobo Life Building in Jongno-gu, Seoul, Shin said most insurers had neglected after-sale service for existing customers while pouring resources into excessive commission and incentive competition and agent recruitment drives — all in pursuit of new-contract sales figures. "As a result, mis-selling, policy-switching and orphaned contracts have been mass-produced, and the damage falls squarely on customers," he said.

He said a regulation on general agency sales commissions — the so-called 1,200 percent rule — that took effect in July, together with the expansion of the commission spread period for individual agents set to begin in January next year, "could become an important turning point for correcting the ills of a short-term performance culture and returning the life insurance industry — which has fallen into a money game — to its roots as a story of neighborly love."

Under the new commission spread system, sales commissions will be paid out over four years starting next year through 2028, then extended to seven years from 2029. Agents will also receive additional long-term maintenance fees in the fifth through seventh years of a contract, strengthening their incentive to manage policies over the long term. Financial regulators said the measure is designed to address the widespread industry problems of mis-selling and policy-switching driven by competition for new-contract sales.

Shin has long held that life insurance is a financial system through which policyholders pool their spirit of "neighborly love" to protect those facing hardship, and that restoring its proper function is both the mission and social responsibility of those in the industry.

Shin said the era of Darwin's "survival of the fittest" — where those best adapted to their environment survive — has given way to an age of "survival of the fastest," where only companies that respond most quickly to change endure. "Kyobo Life must also move swiftly toward value management centered on customer and shareholder value, as required under the new IFRS 17 accounting standards," he said.

He went on to say that field sales managers should consistently recruit and develop "farmer-type" agents — those who see a policy through until a customer receives a payout for illness or accident — rather than "hunter-type" agents focused solely on signing new contracts. "Please make every effort to raise agent retention rates and coverage maintenance rates, so that we can take full responsibility for seeing customers through from enrollment to policy maintenance to claims payment," he said.