The Insurance Regulatory and Development Authority of India (IRDAI) has tightened rules governing how top executives in insurance companies are paid, linking bonuses and incentives directly to financial health, customer outcomes and transparency disclosures.
In a circular issued May 25, the regulator said remuneration of Key Management Personnel (KMPs) — including CEOs, managing directors and senior executives — must now be aligned with measurable performance parameters such as claims settlement speed, grievance redressal and product performance.
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Insurers will be required to publicly disclose these performance metrics on their websites in a simple, accessible format, along with historical data for the previous three years. The move is aimed at enabling policyholders to make more informed decisions.
The new framework mandates frequent disclosures. Financial soundness indicators must be published quarterly, while product performance, claims responsiveness and grievance handling metrics must be disclosed every month.
Crucially, executive incentives will be tied to a fixed set of parameters from FY27. These include financial metrics such as cost efficiency and policy retention, alongside customer-facing measures like claims settlement timelines and complaint resolution rates. The regulator has also required disclosures on product features, returns and commission structures.
IRDAI has specified that at least 50% of the performance evaluation for KMPs must be based on these core parameters. Within this, compliance with accounting standards and removal of misleading “dark patterns” in customer interactions will carry fixed weightage.
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Boards are required to ensure that remuneration structures reflect risk outcomes and long-term performance, rather than short-term financial gains alone. Additional performance parameters may be set by companies, but must be clearly defined in remuneration policies.
The overhaul marks a shift toward outcome-based pay and heightened transparency in the insurance sector, with a clear focus on improving policyholder experience and accountability.
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