Shin Chang-jae: "Installment Payment System for Commissions Will Normalize the Life Insurance Industry 'Reduced to a Money Game'"

Need to Correct the Pitfalls of Short-Term Sales Focus

Transition to Customer- and Shareholder-Centered Value Management

Emphasis on Nurturing 'Farmer-Type' Insurance Planners

Shin Chang-jae, CEO and Chairman of the Board at Kyobo Life Insurance, stated that regulatory changes such as the installment-based payment system for insurance planner commissions could serve as a turning point to normalize the life insurance industry, which has devolved into a money game.

Shin Chang-jae, CEO and Chairman of the Board of Kyobo Life Insurance, is delivering a commemorative speech at the '68th Anniversary Ceremony' held on the 7th at the Kyobo Life Insurance Building in Jongno-gu, Seoul. Kyobo Life Insurance

At the '68th Anniversary Celebration' held on the 7th at the Kyobo Life Insurance Building in Jongno-gu, Seoul, Shin said, "The majority of insurance companies have neglected ongoing service for existing customers, instead engaging in excessive competition over new contracts, offering high commissions and incentives, as well as competing over recruiting planners. As a result, we have seen an increase in misselling, replacement contracts, and orphan contracts, and the damage is being borne entirely by the customers."

He pointed out that as the insurance industry spends excessive business expenses in pursuit of outward growth, the burden of reserving surrender value funds increases, which then leads to a decline in corporate value and a reduction in resources for dividends, ultimately having a negative impact on both customers and investors.

In particular, Shin expressed hope that the planned expansion of the installment payment period for insurance planner sales commissions, scheduled to take effect early next year, will help address the current sales practices that are overly focused on short-term results.

He said, "Following the regulatory measure implemented in July this year regarding the 1,200% commission rule for corporate insurance agency planners (GAs), the upcoming expansion of the installment payment period for insurance planner sales commissions in January next year will correct the problems inherent in a sales culture based on short-term results. This will be a crucial turning point for returning the life insurance industry—now reduced to a money game—to a business about neighborly love and responsibility."

The installment-based payment system for insurance planners’ commissions, as referenced by Shin, refers to a policy where commissions that were mainly paid out within a year of a sale are instead distributed over a much longer period. Starting from 2027, commissions will be paid over four years, and from 2029, the period will be extended to seven years.

Shin also stressed the need to shift toward 'value-based management' centered on customer and shareholder value. He said, "We have now entered an era of 'survival of the swift,' where only companies that adapt most quickly to environmental changes survive, going beyond Darwin’s idea of 'survival of the fittest.' Kyobo Life Insurance must also rapidly transition to value-based management focused on customer and shareholder interests, as required by the implementation of the IFRS 17 accounting standards."

He further emphasized the importance of nurturing 'farmer-type' insurance planners—those who take long-term responsibility for maintaining and protecting client contracts—rather than 'hunter-type' planners who only focus on acquiring new contracts. Shin said, "Field sales managers must consistently recruit and develop 'farmer-type' planners who not only make clients realize the need for life insurance and achieve complete enrollment, but also maintain those contracts until clients receive their claims for illness or accidents, rather than 'hunter-type' planners who are only good at bringing in new business."

In closing, Shin remarked, "Now is the time for everyone to renew their commitment to building Kyobo Life Insurance into a leading company that endures for a hundred years."

This content was produced with the assistance of AI translation services.