The Insurance Regulatory and Development Authority of India (Irdai) has issued new directives requiring insurers to link the remuneration of managing directors, chief executive officers and other senior executives to customer-centric outcomes. According to reports from PTI and The Hindu BusinessLine, the regulator issued amendments under the IRDAI (Corporate Governance for Insurers) Regulations, 2024, with the new norms taking effect immediately. In a circular on remuneration to key management persons (KMPs), Irdai has outlined the 'parameters forming the basis of remuneration package (including incentives) of MD and CEO and all other directors and other senior management officials'.
The revised framework establishes specific performance parameters for remuneration packages and incentives for top management personnel. As reported by The Hindu BusinessLine, these parameters include financial soundness, product performance, claim responsiveness, timely grievance redressal and removal of dark patterns from insurers' and distributors' websites. The updated performance framework further empowers Boards to emphasise improvement in customer satisfaction and experience indicators, timely resolution of claims and grievances, reduction in repeat complaints and service failures, and delivery of fair, transparent, and customer-friendly processes. Products' performance parameters will detail features, inclusion & exclusions, FAQs, premium rate increase, sale and exit performance and returns, while claim responsiveness will bring transparency on time efficiency, nature of settlement, and value proportion of the settlement.
Irdai has mandated comprehensive disclosure requirements for performance metrics used in determining key management personnel remuneration. According to the regulator's statement, some disclosures must be made monthly and others quarterly in an 'easy to access' and 'easy to understand' format on insurers' websites. The disclosures are designed to be accessible without requiring visitors to provide personal details such as phone numbers, with the aim to enhance transparency and accountability through timely, consistent and accurate disclosure of comparable information across insurers for the current and preceding three years. As per The Hindu BusinessLine, grievance redressal parameters seek to enhance transparency by mandating a distinction between service requests and grievances, and disclosure of time taken.
The new framework forms part of Irdai's broader effort to strengthen customer trust, improve transparency and increase accountability across the insurance sector. According to Ajay Seth, Chairman, Irdai, as reported by The Hindu BusinessLine, the evolving expectations of customers and needs of the economy require placing greater emphasis on measurable customer outcomes, transparency in decision-making, responsiveness, and sustainable value creation. The updated performance framework will move beyond traditional operational and financial metrics to include a stronger focus on customer-centric and governance-oriented outcomes. "Insurer leadership commitment will be critical in ensuring that these principles are embedded across all levels of the organization. We are confident that, through collective effort and accountability, we will strengthen trust in the sector and deliver greater value to policyholders," Seth stated. The guideline also mandates disclosure of the performance of insurers in respect of parameters adopted for remuneration of all KMPs, with sharing information of multiple performance parameters of KMPs and enhanced Board oversight strengthening governance and compliance practices.
