Summary of this article
Irdai links insurance executive incentives with claim settlement, grievance resolution performance
Insurers must disclose claim rejection, complaint handling, financial metrics publicly monthly
Customer service standards to influence KMP variable pay from FY2026-27 onwards
Irdai targets dark patterns, governance gaps, policyholder protection in insurance sector
Insurance companies may soon have to think beyond premium growth while deciding bonuses and incentives for senior executives.
The Insurance Regulatory and Development Authority of India (Irdai) has introduced fresh corporate governance changes that will directly link the remuneration of key management personnel (KMPs) with how insurers treat policyholders, settle claims, handle complaints, and manage overall financial discipline.
In a circular issued on May 25, the regulator amended parts of its master circular on corporate governance for insurers, 2024. The changes will come into force from FY 2026-27.
1 May 2026
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The latest directions indicate that Irdai wants insurance companies to place greater importance on customer experience and operational conduct instead of focusing only on business expansion numbers.
Insurers Asked To Put More Performance Data In Public Domain
Under the revised framework, insurers will now have to place key performance information related to executive remuneration on their websites in a simple and easily accessible format.
The disclosures will include areas such as claim settlement performance, grievance handling, financial soundness, product performance, implementation of Indian Accounting Standards, and steps taken to remove “dark patterns” from customer interactions.
Dark patterns broadly refer to website or app designs that may confuse or influence customers into making decisions they may not have otherwise taken.
The regulator has also directed insurers not to seek personal details from users simply for viewing such disclosures online.
For life insurers, parameters such as renewal premium ratios, persistency levels, expense management, and assets under management will be considered while assessing executive performance.
For general and standalone health insurers, metrics such as incurred loss ratios, renewal business ratios, and expense management indicators will be taken into account.
The disclosures related to claims, product performance, and grievance handling will have to be updated every month, while financial soundness data will need to be disclosed quarterly.
Claims Handling And Complaints To Affect Incentives
One of the most significant changes is the direct connection between customer service standards and variable pay for senior executives.
Irdai has said insurers must evaluate KMP performance on the basis of factors such as speed of claim settlement, responsiveness towards policyholders, grievance resolution efficiency, and product performance.
Insurance companies will now have to disclose the proportion of claims settled within 15 days, 30 days, 60 days, and beyond. They will also need to disclose how many claims were fully paid, partially paid, rejected, repudiated, or remained pending.
Similarly, grievance-related disclosures will have to show the number of complaints resolved within specified timelines and those that remain unresolved.
The regulator has separately clarified that routine service requests and grievances should not be mixed together. However, if a service request remains unresolved for over seven days, it may need to be treated as a grievance.
Industry experts believe the move could push insurers to improve customer servicing standards because weak claim settlement performance or rising unresolved complaints may now directly impact executive incentives.
More Responsibility On Boards And Committees
The circular also increases accountability for insurer boards and nomination and remuneration committees.
Irdai has directed nomination and remuneration committees to work in coordination with risk management committees while designing remuneration policies for senior management.
According to the regulator, remuneration structures should remain aligned with policyholder interests, long-term sustainability, and prudent risk management practices.
The regulator has prescribed six core parameters for performance assessment, which together will account for 50 per cent of the weightage while deciding variable pay. Implementation of Indian Accounting Standards and removal of dark patterns will each carry 10 per cent weightage.
The remaining weightage may be decided by insurers based on their business priorities and the role of individual executives.
The latest changes are expected to increase transparency in the insurance sector and may also encourage insurers to improve customer-facing practices more seriously than before.
