Hello. I am Law Firm Cheongchul, Attorney Oh Seung-hyun.

In operating an insurance agency (GA), internal rules (commission, refund, maintenance commission, dismissal, risk management, etc.) are essential. However, when disputes arise, the agent's side often responds like this.

• "I never received that regulation (or explanation) when I signed the contract, did I?"

• "Does the company change it unilaterally and apply it retroactively to me?"

• "I signed that 'comprehensive consent (subject to internal regulations being changed)' clause, so it's over, right?"

To sum up, the court considers that although internal regulations can be incorporated into the contract content (terms and conditions), applying unfavorable changes ‘automatically’ to agents requires ‘notification (communication), explanation, and evidence’ to be key. Particularly, because the more adverse the changes, relying solely on the phrase “comprehensive delegation/consent” may weaken the defense, clear notification procedures (such as content certification) and documentation are practically essential (Seoul Western District Court, March 29, 2013, Judgment 2012Na9731, Article 7 of the Act on Regulation of Terms and Conditions).

1. Internal regulations can become 'terms and conditions' that bind the contract, not merely 'internal documents.'

Terms and conditions refer to “contract contents prepared in advance for one party to enter into contracts with multiple counterparties” (Article 2 of the Act on Regulation of Terms and Conditions, Article 88 of the Insurance Business Act). Therefore, the operational rules, commission rules, and refund rules created by GA for common application to multiple agents are often evaluated as terms and conditions (Seoul High Court, October 21, 2015, Judgment 2015Na22054, etc.).

Moreover, when the court judges whether internal regulations are incorporated into the contract,

• it is very important to see if it is explicitly​ stated in the engagement contract/additional agreement that “internal regulations are part of the contract,”

• whether the regulations were provided and posted​ to be available for constant viewing,

• and if there are circumstances suggesting that the agent was aware of the contents, such as through training, monthly meetings, or statements (Seoul Southern District Court, July 13, 2023, Judgment 2021Gahap100466, Seoul Southern District Court, January 19, 2024, Judgment 2023Na59634, etc.).

2. Even if there is a comprehensive clause stating “subject to internal regulation changes,” it is a separate issue if it involves ‘unfavorable changes.’

The core of the terms and conditions law is ​fairness (good faith) and predictability​ (Article 6 of the Act on Regulation of Terms and Conditions, Seoul Central District Court, September 14, 2018, Judgment 2017Gahap535557).

Furthermore, clauses that allow a business to unilaterally determine or modify provisions (e.g., commissions, settlement methods) without justifiable reasons are deemed invalid (Article 10, Clause 1 of the Act on Regulation of Terms and Conditions).

In other words, a structure stating “the company can change it if necessary” is difficult to assure it will stand in disputes (Seoul Central District Court, September 14, 2018, Judgment 2017Gahap535557).

In particular, in actual judgments, to apply regulations that changed unfavorably to agents after the contract was made, it was determined that “an agreement to change the contract content under the changed regulations” or, at the very least, circumstances comparable to that (notification, signature, etc.) are necessary (Seoul Western District Court, March 29, 2013, Judgment 2012Na9731). In that case, the contract specified a ‘notification upon change + handwritten signature’ procedure, and failing to follow it resulted in the unfavorable amended regulation not being applicable to the agent.

3. In unfavorable changes, the decisive factor is whether ‘notification (communication) was genuinely and clearly made’ — why is content certification valid?

In practice, contrary to the claim of “notification/announcement,” the actual dispute centers around whether it was delivered (i.e., actually reached the counterpart) and the evidence of that. A declaration of intent must, in principle, reach the other party to take effect (Civil Code Article 111).

Moreover, terms often include clauses such as “it is deemed delivered if posted” or “if there are no objections, it is deemed agreed,” but provisions that allow significant decisions affecting the interests of customers to be ‘deemed delivered’ without just cause may be invalid, making it difficult to rely solely on “formal postings” for safety (Article 12 of the Act on Regulation of Terms and Conditions, Seoul Central District Court, February 15, 2019, Judgment 2016Gadan5293427).

Thus, notifications of unfavorable changes or dismissal/refund should be designed to be provable in disputes through methods such as

• ​content certified mail​ (delivery and content verification),

• electronic notice (posting logs, viewing history),

• email (delivery confirmation and replies),

• and written confirmations/electronic signatures. It is safe to structure notifications in ways that can be proven in disputes. In fact, there are many cases where dismissal notices sent as content certification were acknowledged as having been delivered (Uijeongbu District Court, November 17, 2022, Judgment 2021Na217685, Ulsan Southern District Court, July 13, 2023, Judgment 2021Gahap100466).

4. Major dispute points regarding the 'validity of internal regulations'

(1) Dispute that “the regulations were originally included in the contract”

The court tends to recognize the incorporation of internal regulations if circumstances indicate that they were generally known in trade and the agent had been in the industry for a long time (repeated statements, insurance bonds, managerial status, etc.) (Seoul Eastern District Court, October 29, 2021, Judgment 2021Na23300).

(2) “The regulations have been changed (amended)” — notification and procedure are key in case of unfavorable changes

If the amendment is not particularly unfavorable​ to the agent or has been repeatedly informed through training, meeting materials, postings, etc., there are cases where its validity has been recognized (Seoul Southern District Court, July 13, 2023, Judgment 2021Gahap100466).

Conversely, there are instances where unfavorable changes were made to agents without following the notification/signature procedures stipulated in the contract, leading to rejection of applicability (Seoul Western District Court, March 29, 2013, Judgment 2012Na9731).

(3) Refund (clawback) regulations — mostly ‘valid,’ but risky if the phrasing is rough

Since commissions often have a prepayment structure, there are many cases where the necessity of refunds in contract termination/maintenance non-compliance/cancellation is recognized, based on the premise that clawback regulations are valid (Seoul Central District Court, September 14, 2018, Judgment 2017Gahap535557).

However, a structure that allows unlimited refunds at the discretion of the insurance company (or GA), regardless of the agent's fault, such as “filing a complaint = refund in full at any time without a time/justification limit,” poses a risk of being ruled unfair (unfairly detrimental/unexpected clause) under the terms and conditions law, leading to invalidation or limited interpretation (Incheon District Court, April 13, 2017, Judgment 2016Gadan234912).

These judgments summarize that the terms are only valid “within the scope of justified reasons (e.g., agent fault, etc.).”

5. Practical checkpoints (from the perspective of insurance agencies) — operating system of internal regulations that “wins disputes”

(1) Specify the ‘version’ and ‘scope of application’ of internal regulations in the contract

Rather than stating “subject to internal regulations,” it is safer to specify the name, version, and core items (commission/refund/dismissal/settlement/maintenance commission) of the internal regulations and secure signatures (Articles 10 and 16 of the Act on Regulation of Terms and Conditions, Article 4 of the Enforcement Decree of the Act on Regulation of Terms and Conditions).

(2) Unfavorable changes should be a package of ‘prior notification + proof of delivery + objection procedures’

It is recommended to have a system that includes prior notice (e.g., 1 month) + a specified effective date + a summary of key changes + a channel for questions/objections, leaving traces of delivery and awareness using content certification/electronic signature/viewing logs (Seoul Central District Court, February 15, 2019, Judgment 2016Gadan5293427).

(3) If using ‘implied consent (no objection is deemed agreement),’ be stricter

Since clauses attributing intent in terms of liability can be invalid, it is necessary to ensure at least separate, clear notification + reasonable time + actual avenues for raising objections to minimize practical risk (Seoul Central District Court, February 15, 2019, Judgment 2016Gadan5293427).

(4) Refund and settlement notifications must include “the basis for calculations.”

It is advantageous in disputes to send content-certified notices including reasons for refunds, target contracts, calculations, and prior payments/offsetting details.

6. Conclusion

Insurance agency-agent contracts do not end with “a standard engagement contract.” To reduce dispute costs, it is necessary to align the incorporation structure of internal regulations, the notification process for unfavorable changes, the design of evidence against refund/settlement disputes, and the legality of dismissal procedures.

Law Firm Cheongchul offers advice to organize GA's internal regulations (commission, refund, dismissal, settlement) in line with the flow of the terms and conditions law and precedents, ensuring that even when unfavorable changes are necessary, the ‘process’ of notification, consent, and evidence is well-designed.