The Insurance Regulatory and Development Authority of India (IRDAI) has introduced comprehensive changes to executive compensation structures, requiring Key Management Personnel (KMPs) to be evaluated based on measurable performance parameters. According to the latest circular issued on May 25, the new framework mandates that at least 50% of performance evaluation for KMPs must be based on core parameters including claims settlement speed, grievance redressal, and product performance metrics. The performance metrics must be disclosed on the company's website along with corresponding information for the preceding 3 years, ensuring transparency and accountability in executive compensation. Under the new framework, the performance evaluation of Key Management Personnel (KMPs), including CEOs and senior executives, will now depend heavily on measurable customer-focused parameters such as claim settlement speed, grievance redressal efficiency, product performance, policy retention and complaint resolution rates.
Under the new regulations, insurers must publicly disclose performance metrics on their websites in a simple, accessible format, along with historical data for the previous three years. The latest framework requires disclosure of claim responsiveness metrics comprising proportions of claims settled within 15 days, 30 days, 60 days, and beyond from the date of filing, along with remaining unsettled claims at the end of the month. Financial soundness indicators must be published quarterly, while product performance, claims responsiveness and grievance handling metrics must be disclosed every month. The regulator has also required disclosures on product features, returns and commission structures to enable policyholders to make more informed decisions. According to the circular, insurers must publish these performance indicators on their websites in a simple and easily accessible format, along with comparable data for the previous three years.
The new framework specifically links executive incentives to fixed parameters from FY2026-27, including financial metrics such as cost efficiency and policy retention, alongside customer-facing measures like claims settlement timelines and complaint resolution rates. For FY 2026-27, IRDAI has made six parameters mandatory for evaluating KMP performance and determining variable pay or incentives. These include: Financial soundness and improvements, Product performance and improvements, Claim responsiveness and improvements, Grievance redressal and improvements, Implementation of Indian Accounting Standards (Ind AS), and Removal of dark patterns in insurer and distributor interactions. The Board shall decide improvement benchmarks based on the company's business strategy, and assess the performance accordingly only when complete and consistent disclosures are made, ensuring that remuneration structures reflect risk outcomes and long-term performance rather than short-term financial gains.
The regulations require boards to ensure that remuneration structures reflect risk outcomes and long-term performance, rather than short-term financial gains alone. The framework mandates frequent disclosures with financial soundness indicators published quarterly, and product performance, claims responsiveness and grievance handling metrics disclosed monthly. The regulator has tightened norms around grievance handling, requiring insurers to publicly disclose grievance redressal performance including the number of grievances resolved within specified timelines and pending unresolved complaints. IRDAI has clarified that complaints related to policy sale, services by insurer and/or by distribution channel, delay or inadequacy of claim servicing or settlement, delay in pre or post-treatment authorization in case of health insurance, and delay in assessment of loss in case of motor or property insurance must be treated as grievances. This comprehensive approach aims to align executive compensation with measurable customer outcomes and operational excellence, marking a significant shift toward outcome-based pay in the insurance sector.
