Insurance CEOs May Now Feel The Heat Over Delayed Claims And Complaints

The Indian insurance sector may be heading towards a cultural shift, one that puts policyholders much closer to the centre of decision-making than before.

The Insurance Regulatory and Development Authority of India (Irdai) has proposed a new approach under which the performance-linked pay of insurance company CEOs and senior executives could depend partly on how customers are treated. In simple terms, companies may no longer be judged only by how much premium they collect or how fast they grow. The quality of claim settlement and customer grievance handling could now carry real weight.

The move comes after years of frustration among policyholders, especially in health insurance. Policyholders have frequently complained of running from one desk to another during emergencies, dealing with long waits for approvals, patchy communication from insurers, and claim payouts that turn out to be lower than expected.

While the industry has expanded rapidly, customer experience has not always kept pace.

Now, the regulator appears keen to change that equation.

More Pressure On Insurers To Improve Service Standards

The regulator wants insurers to put out clearer data on how they are handling customer claims and complaints. Companies may be asked to show how quickly claims are processed, how many are turned down, and how many cases continue pending beyond normal timelines.

The proposed rules could also require insurers to share longer-term numbers on customer complaints and how many policyholders continue renewing their plans year after year. The idea is to create greater transparency and make companies more answerable for service standards, according to a recent report by The Economic Times.

For a long time, insurance companies have largely focused on expansion targets, premium growth, and profitability. Industry observers say the regulator now wants insurers to pay equal attention to what happens after the policy is sold.

That matters because insurance is not a product people buy for immediate use. Customers usually discover the real value of a policy only during a hospitalisation, accident, or financial crisis. Delays or disputes at that stage can severely affect household finances.

Linking senior management incentives to customer outcomes is therefore being seen as an attempt to bring behavioural change at the top level.

Executives may now have stronger reasons to improve internal systems, reduce turnaround time, and ensure grievances do not pile up unresolved for months.

Why The Industry Is Watching Closely

The proposal has triggered discussion across the insurance industry. Some experts believe the move could improve trust in the sector over time, particularly in retail health insurance, where customer complaints tend to be higher.

There is also a growing recognition that poor service damages long-term business. Customers dissatisfied with claims or support are less likely to renew policies and more likely to switch insurers.

At the same time, insurers argue that claim assessment cannot become a mechanical exercise. Companies still need room to investigate fraud, check documentation, and verify disclosures before approving claims. Industry executives say genuine scrutiny should not be mistaken for poor customer service.

Another issue that continues to worry consumer groups is mis-selling. Many buyers still purchase policies without fully understanding exclusions, waiting periods, or co-payment clauses. Experts point out that unless product communication improves, disputes may continue even if complaint resolution systems become faster.

Still, the regulator’s message appears unmistakable. Insurance companies cannot focus only on selling more policies. Increasingly, they may also be expected to demonstrate that they are treating existing customers fairly.

For policyholders, that could become one of the more important changes in the sector in recent years. After all, when people buy insurance, they are ultimately paying for reassurance. The regulator now seems determined to ensure that insurers are judged on whether they actually deliver it.

FAQs

Why does Irdai want to link CEO pay with customer service?
The regulator wants insurers to focus more on claim settlement and grievance handling, not just premium growth.

How could the proposed rules affect policyholders?
Insurers may face greater pressure to settle claims faster and improve complaint resolution systems.

Will insurers still be allowed to investigate suspicious claims?
Yes, companies can continue verifying documents and checking for fraud before approving claims.