India's insurance sector could soon see a significant shift in how companies report their financial performance. The Insurance Regulatory and Development Authority of India (IRDAI) has proposed introducing a new accounting framework for insurers from April 2026, aimed at aligning India's financial reporting standards with global practices.
In a consultation paper released this week, the regulator outlined plans for insurers to transition to the Indian Accounting Standards (Ind AS) framework. The proposal includes adopting Ind AS 117, which governs insurance contracts, and Ind AS 109 for financial instruments. These standards broadly mirror global norms such as IFRS 17, which has already been implemented in several international insurance markets.
The proposed shift would apply across the industry, including life insurers, general insurers, health insurers and reinsurers, and is intended to improve transparency, consistency and comparability in financial reporting.
A New Way to Recognise Profits
One of the key changes under the proposed framework relates to how insurers account for profits and expenses. Currently, certain costs such as commissions paid to distributors or policy acquisition expenses can be recognised upfront. Under the new accounting rules, these costs would instead be spread over the duration of the insurance policy.
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Similarly, insurers would be required to calculate future claim liabilities by discounting them to reflect the time value of money, rather than reporting them at their full undiscounted value.
Another major element introduced under the new standards is the Contractual Service Margin (CSM), which represents the unearned profit embedded in an insurance contract. Instead of recognising profits immediately, insurers would recognise them gradually as services are delivered during the policy term.
What the Change Means for Policyholders
Despite the changes in financial reporting, the proposed accounting transition is not expected to affect the benefits or contractual rights of policyholders. However, the regulator believes the move could improve visibility into insurers' financial health and risk exposure.
According to Trupti Balasubramaniam, CEO and Principal Officer at Probus, the shift represents an important structural change for the industry. “The move to Ind AS by April 2026 is more than just a compliance checkbox; it is a massive leap forward for the Indian insurance landscape,” she said. Balasubramaniam added
“When an insurer's financial health is reported through a true-to-market lens, it builds a deeper layer of trust and long-term solvency. It ensures that the promises made today are backed by a much clearer financial reality,” she said.
Greater Transparency
Aligning India's insurance accounting framework with international standards could also make financial statements of domestic insurers easier to compare with global peers.Experts say such comparability is important for attracting long-term capital and strengthening investor confidence in the sector.
Balasubramaniam noted that the enhanced clarity could also influence how insurers design products and price risk. “We also expect this clarity to spark better product pricing and more customer-first innovation,” she said.
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