Insurance subscription(CG). (Image courtesy of Yonhap)
SEOUL, April 23, (Korea Bizwire) — Nearly one-third of insurance policies in South Korea are canceled within two years, with long-term contract retention rates significantly trailing those of major global markets, according to a report released April 22, 2025, by the Financial Supervisory Service (FSS).
The report, titled “2024 Insurance Sales Channel Performance and Supervision Plan,” revealed that as of 2024, South Korea’s one-year policy retention rate stood at 87.5%, dropping to 69.2% after two years, and further down to 54.2% after three years — the point at which advance commissions typically end. By the five-year mark, the rate fell to just 46.3%.
In contrast, major insurance markets such as Singapore (96.5%), Japan (90.9%), Taiwan (90.0%), and the United States (89.4%) maintain policy retention rates about 20 percentage points higher over a two-year period.
Channel-specific data showed that exclusive agency and general agency (GA) channels posted relatively high one-year retention rates of 87.7% and 88.3%, respectively. However, both dropped into the mid-50% range by the third year.
Online (CM) channels, where customers choose products directly, reported stronger long-term performance with a 66.1% retention rate after three years.
While the rate of mis-sold policies, or “incomplete sales,” improved from 0.033% in 2023 to 0.025% in 2024, life insurance (0.050%) continued to see higher mis-selling rates than non-life insurance (0.014%).
Nearly one-third of insurance policies in South Korea are canceled within two years (Image created by AI/ChatGPT)
GA channels showed improvements as well, with an overall mis-selling rate of 0.060%, comparable to that of exclusive channels. Still, a gap persisted between subsidiary-type GAs (0.026%) and larger independent GAs (0.077%).
The number of licensed agents in South Korea grew to 651,256 by the end of 2024, up 7.8% from the previous year. Among life insurers, bancassurance dominated initial premium sales (69.8%), followed by company employees (16.1%), exclusive agents (6.9%), and GAs (6.7%).
For non-life insurers, GAs led with 31.1%, followed by company employees (25.1%), online channels (19.2%), and exclusive agents (7.2%).
The settlement rate for newly hired exclusive agents rose to 52.4%, a 5.1 percentage-point increase from 2023, while average monthly income per exclusive agent climbed 11.2% to 3.38 million won.
Despite these improvements, the FSS expressed concern over South Korea’s persistently low long-term retention rates compared to international standards. The agency also warned that recent deregulation of bancassurance sales ratios could trigger intensified competition, potentially leading to consumer harm.
To address these issues, the FSS plans to unveil a revised sales commission structure in the first half of 2025. The reform will introduce caps on upfront commission payments and encourage multi-year, performance-based compensation to promote policy retention and curb excessive churn in insurance sales practices.
“As short-term indicators improve, we must now focus on raising long-term retention rates to global standards,” the FSS said, emphasizing enhanced oversight of bancassurance channels and continued reforms to commission-driven business models.
Ashley Song (ashley@koreabizwire.com)
