Sales commissions paid to insurance agents will be distributed monthly over a period of 3-7 years to improve the retention rate of insurance policies, beginning in the first quarter of next year.
Currently, the sales commission is paid in the first two years, which has led to frequent job changes among insurance agents and churning of insurance policies.
In addition, starting in the first half of next year, detailed commission information will be provided to customers when they look to purchase insurance, according to local media reports. The financial authorities have started to regulate related products as consumers are often encouraged to buy high-commission products that are advantageous to insurance agents rather than products that are suitable for the customers.
The Financial Services Commission and the Financial Supervisory Service held a meeting on insurance reform earlier this week with representatives of academia, research institutions, insurance companies, and industry associations.. A reform plan will be finalised after the regulators collect feedback through briefings for brokers and agents during the first quarter of next year.
Proportional payout insurance plans
The regulators have also said they would ban proportional payout insurance products due to concerns over excessive medical treatment and the financial strain on the national health insurance system.
Proportional payout insurance policies provide increasing payouts as medical expenses rise, leading to moral hazard where policyholders may seek unnecessary treatments to maximise payouts within annual coverage limits. These products are often tied to coverage for cancer, brain and heart diseases, circulatory system treatment, and injury or illness care.
To enforce the ban, the authorities plan to revise insurance product screening standards in insurance regulations.
In addition to these measures, the authorities will focus on promoting sound financial management among insurers. After the adoption of the IFRS 17 accounting standard in 2023, some insurers were found to inflate financial results by adjusting assumptions such as for lapse rates.
The authorities also outlined steps to help policyholders claim unpaid insurance payouts. Insurers will be required to develop user-friendly inquiry and refund functions on their apps, while senior-friendly guidance documents will be provided to ensure accessibility.