The Insurance Regulatory and Development Authority of India (Irdai) has issued revised remuneration norms requiring 50% of variable pay and incentives for key managerial personnel (KMPs) to be linked to customer-centric parameters from FY27. According to latest reports, the framework mandates that 50% weightage will be spread across six parameters including overall financial soundness, product performance, claims responsiveness, grievance redressal, implementation of Indian Accounting Standards (Ind AS), and removal of dark patterns in customer interactions. However, industry executives note that Ind AS implementation and dark-pattern removal will carry only 10% weightage each, effectively leaving only 30% weightage for core operating and customer-service metrics. This represents a dilution from Irdai's earlier draft proposal that suggested a 40:30:30 evaluation structure with 40% weightage specifically linked to customer-related metrics. The revised norms took immediate effect for performance assessments from FY27 onwards, as reported by Business Standard.
Under the new framework, insurers have been directed to disclose standardised performance data covering multiple areas including financial soundness, product performance, claims handling, grievance redressal and customer service quality. As reported by The Economic Times, this data disclosure is designed to improve transparency, strengthen customer trust and reinforce accountability across the insurance sector. The regulator emphasized that this move aims to remove information asymmetry in the sector and empower policyholders to make informed decisions. According to Rediff Moneynews, the guideline mandates disclosure of insurers' performance in respect of parameters adopted for remuneration of all KMPs, with some mandated disclosures required on a quarterly basis and others on a monthly basis in an 'easy to access' and 'easy to understand' manner on company websites.
According to The Economic Times, Irdai chairman Ajay Seth explained that evolving customer expectations and the needs of the economy require insurers to place greater emphasis on measurable customer outcomes, responsiveness, transparency in decision-making and sustainable value creation. The regulatory changes represent a fundamental shift from traditional performance evaluation methods to ones that prioritize customer satisfaction and service quality metrics. As reported by Rediff Moneynews, the revised performance framework will move beyond traditional operational and financial metrics to include a stronger focus on customer-centric and governance-oriented outcomes, empowering 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.
While industry executives have welcomed the Insurance Regulatory and Development Authority of India's move to link executive pay to customer outcomes, several have raised concerns about the framework's effectiveness and regulatory overreach. As reported by Business Standard, some executives indicated that the regulator appeared to be taking a more active role in board-level and operational matters at insurance firms. A senior insurance company official noted that the framework reflects a degree of over management into board-level decision-making and extends regulatory reach into areas that should primarily remain within board discretion. Industry executives also argue that the framework does not adequately account for functional differences across KMP roles and imposes uniform expectations that may not be relevant to all functions. However, some industry officials defended the move, noting that the Reserve Bank of India (RBI) has similar guidelines governing compensation structures for senior executives at banks, given that insurers manage public money and should remain accountable to all stakeholders.
