The Insurance Regulatory and Development Authority of India (IRDAI) has introduced new regulations requiring insurers to link executive compensation to customer-centric outcomes. According to reports from The Economic Times, NDTV Profit, Devdiscourse, and The Hindu BusinessLine, the regulator has amended the IRDAI (Corporate Governance for Insurers) Regulations, 2024 to establish new parameters for remuneration packages of managing directors, CEOs, and other senior management officials. The updated framework mandates that at least 50% of variable pay for insurance company KMPs be linked to customer-focused metrics such as claims, grievances and product performance from FY27 onwards. As reported by The Economic Times, the new norms have come into force with immediate effect from Tuesday, marking a significant shift in how insurance companies structure executive compensation. The circular was issued on May 25 by IRDAI, establishing clear timelines for implementation. In a statement on Tuesday, IRDAI emphasized that revisions of the performance parameters are part of its continued commitment to strengthening customer trust, improving transparency, and reinforcing accountability across the sector.
Under the revised framework, six broad parameters including overall financial soundness, product performance, claim responsiveness, grievance redressal, implementation of Indian Accounting Standards, and removal of 'dark patterns' will together carry a 50% weightage in the assessment of performance-linked pay and incentives for KMPs. Of this, accounting standards implementation and dark pattern removal will carry a 10% weightage each, while the remaining 30% weightage will be determined by the board. This represents a significant shift from the earlier draft proposal that suggested a 40-30-30 performance evaluation structure with 40% weightage linked to customer-related metrics, 30% to shareholder-linked parameters and 30% to regulatory compliance metrics. As reported by The Economic Times and NDTV Profit, this is the first time IRDAI has explicitly included 'product performance' and 'claim responsiveness' among the metrics for evaluating executive incentives. The guideline also mandates disclosure of the performance of insurers in respect of parameters adopted for the remuneration of all KMPs. The updated performance framework empowers boards to place greater focus on customer satisfaction, timely settlement of claims and grievances, reduction in repeat complaints and service failures, and delivery of fair, transparent, and customer-friendly processes.
The regulations introduce mandatory disclosure requirements with varying frequencies. According to The Economic Times, NDTV Profit, Devdiscourse, and The Hindu BusinessLine, information on financial soundness must be disclosed quarterly, while products' performance, claim responsiveness, grievance redressal data is required monthly. Under product performance, insurers will have to publicly disclose detailed product information, including features, exclusions, premium trends, policy exits and returns generated by savings-oriented life insurance products over the preceding three years. On claim responsiveness, insurers will be required to disclose the proportion of claims settled, rejected or closed within 15 days, 30 days and 60 days, along with the number of pending claims. Similarly, insurers must segregate grievances and service requests strictly in line with regulatory expectations and disclose the number and proportion of grievances resolved within prescribed timelines and those remaining unaddressed. The regulations also mandate disclosures on product features, returns and commission structures to provide comprehensive transparency. Evolving expectations of customers and needs of the economy require us to place greater emphasis on measurable customer outcomes, transparency in decision-making, responsiveness, and sustainable value creation, stated Ajay Seth, Chairman of IRDAI. Insurers will now be required to publish performance metrics and KMP remuneration parameters on their websites in an "easy to access" and "easy to understand" format, along with data for the preceding three years, without seeking personal details, including phone numbers of visitors.
For FY 2026-27, the new framework introduces sector-specific performance parameters beyond customer-centric measures. According to The Hindu BusinessLine, life insurers will be evaluated on ratios including assets under management to total premium ratio, renewal premium to new business premium ratio, policy retention metrics, and expense of management to gross direct premium ratio. General and stand-alone health insurers will be assessed on line-wise net incurred loss ratio, renewal premium to new business premium ratio, expense of management to gross direct premium ratio, along with product performance and claim responsiveness indicators. As reported by The Economic Times, NDTV Profit, and Devdiscourse, this represents a significant expansion from the earlier customer-focused metrics to include comprehensive business performance evaluation. The balance 50% weightage for performance assessment has been left to the board or nomination and remuneration committee, which can adopt additional parameters in line with the insurer's business plan. The regulations apply to private insurance companies and mandate disclosures in an "easy to access" and "easy to understand" manner on the company's website, without seeking personal details, including phone numbers of visitors.
Ajay Seth, Chairman of IRDAI, emphasized the regulatory shift in a statement reported by The Economic Times. He stated that evolving customer expectations and economic needs require greater emphasis on measurable customer outcomes, transparency in decision-making, responsiveness, and sustainable value creation. A MD & CEO of a major private general insurer noted that the focus on customer-centric metrics for fixing remunerations and incentives is just one aspect of the new norms prescribed by the insurance regulator. However, industry executives have raised concerns about the operational complexity of the new framework. A senior executive from the life insurance industry expressed concerns about the operational complexity, stating that "putting all the executive pay parameters on the website is a bit too much" as it involves employment contracts between individuals and boards. A CEO noted that claim responsiveness is influenced both by insurer processes and the ability of policyholders to submit complete information, highlighting the complexity of performance metrics that depend on customer behavior and documentation processes. While the move is aimed at improving transparency, some insurers have raised concerns that disclosure of product performance and key metrics could provide insights to competitors, according to a senior actuary at a life insurance company. Industry experts also noted that boards will face a more difficult task in balancing incentive structures for KMPs without creating internal friction or dissatisfaction among leadership teams.
