Ajay Seth, chairman, IRDAI

“Evolving expectations of customers and needs of the economy require us to place greater emphasis on measurable customer outcomes, transparency in decision-making, responsiveness, and sustainable value creation. Accordingly, the revised performance framework will move beyond traditional operational and financial metrics to include a stronger focus on customer-centric and governance-oriented outcomes”, Ajay Seth, chairman, IRDAI

Hyderabad:In a mjor decision after Ajay Seth took charge of the IRDAI, the insurance regulator has mandated some stringent norms for insurers, in a bid to qualitatively improve the performance of the Indian insurance industry in key parameters.

The IRDA’s new remuneration and disclosure framework, released on Monday, for insurers significantly strengthens transparency, accountability and policyholder-centric governance in the insurance sector by linking remuneration of senior management and Key Management Persons (KMPs) with measurable business outcomes, customer service standards and risk management parameters.

“Evolving expectations of customers and needs of the economy require us to place greater emphasis on measurable customer outcomes, transparency in decision-making, responsiveness, and sustainable value creation. Accordingly, the revised performance framework will move beyond traditional operational and financial metrics to include a stronger focus on customer-centric and governance-oriented outcomes”, elaborated Seth on the new remuneration and disclosure framework.

“Insurer leadership commitment will be critical in ensuring that these principles are embedded across all levels of the organisation. We are confident that, through collective effort and accountability, we will strengthen trust in the sector and deliver greater value to policyholders.” stressed Seth.

Remuneration Disclosure Requirements

Insurers will be required to publicly disclose:

-Parameters forming the basis of remuneration packages, including incentives, for:

-Managing Director (MD) & CEO

-Directors

-Key Management Persons (KMPs)

-Payments made to:

-Group entities

-Related parties

These disclosures are aimed at improving governance transparency and enabling informed decision-making by policyholders and the public.

Sharing information of multiple performance parameters of KMPs and enhanced Board oversight will strengthen governance and compliance practices. IRDAI is moving towards removing information asymmetry in the sector and empowering policyholders to make informed decisions, said the IRDAI..

While revising the performance parameters, IRDAI recognized the need for deeper analysis and wider consultation on the issue of evolving an insurance sector wide framework and benchmarking KMP remuneration with other financial sector players, said the IRDAI.

Rajay Sinha, Member (Finance & Investment) said that refinement and revisions related to reducing Expense of Management, promoting Rural and Social Obligations and boosting coverage of Government promoted schemes such as PMJJBY and PMSBY will be taken up in the proposed revision of respective regulations and master circulars.

Mandatory Public Disclosure of Performance Parameters

Insurers must disclose performance metrics used for determining variable pay and incentives of KMPs on their websites in an “easy  to access and easy to understand format, without requiring visitors to provide personal information such as phone numbers.

The disclosures must also include corresponding data for the previous three years.

Frequency of Disclosures

-Financial soundness indicators: Quarterly

-Product performance, claims responsiveness and grievance redressal: Monthly

Integrated Remuneration Policy

The Nomination and Remuneration Committee (NRC) of an insurer, in consultation with the Risk Management Committee, must ensure that remuneration policies:

-Align with policyholder outcomes

-Adjust for all forms of risk

-Maintain symmetry between remuneration and risk outcomes

-Reflect the time horizon of risks

-Ensure an appropriate mix of cash and equity compensation

Mandatory Performance Parameters for FY 2026-27

For assessment of KMP performance and payment of variable pay/incentives, insurers must mandatorily consider six broad parameters. The six parameters together will account for 50% of the overall performance assessment for variable pay.

Overall Financial Soundness

For Life Insurers

Key metrics include:

-Assets Under Management (AUM) to Total Premium ratio

-Renewal Premium to New Business Premium ratio

-Ratio of policies issued to policies exited

-Expense of Management to Gross Direct Premium ratio

For General & Standalone Health Insurers

Mandatory metrics include:

-Line-wise Net Incurred Loss Ratio

-Line-wise Renewal Premium to New Business Premium ratio

-Expense of Management to Gross Direct Premium ratio

Products’ Performance

Disclosure requirements include:

-Features, premiums, performance and returns of products contributing 90% of new or renewal premium

-Board-approved policies on Commission payments,Product approvals and Anti-fraud measure

Claim Responsiveness

Applicable to retail lines such as:Motor,Health,Personal Accident,Homeowners,Retail Fire,MSME package policies.

Insurers must disclose time taken to settle claims:

-Within 15 days

-Within 30 days

-Within 60 days

-Beyond 60 days

Proportion of claims:

-Paid in full

-Paid partially

-Repudiated

-Rejected

-Closed

-Remaining unsettled

-Value proportion of claims settled

Importantly, timelines will be counted from the date of claim filing and not from submission of complete documents.

Grievance Redressal

Insurers must:clearly segregate grievances and service requests and disclose:

-Number and proportion of grievances resolved within 15 days, 30 days, beyond 30 days and pending unresolved grievances

Implementation of Indian Accounting Standards (Ind AS)

Compliance with Ind AS implementation will form part of the performance assessment matrix.

Elimination of Dark Patterns

Insurers must ensure removal of misleading or manipulative digital practices (“dark patterns”) and similar compliance by distributors and intermediaries.

Weightage Structure

The six parameters together will account for 50% of the overall performance assessment for variable pay.

-Ind AS implementation: 10%

-Removal of dark patterns: 10%

-Remaining four parameters: Weightage to be decided by the Board

Board Oversight & Benchmarking

-Boards must determine improvement benchmarks aligned with business strategy.

-Performance assessment can be undertaken only after complete and consistent disclosures are made.

-Disclosure of insurer performance under the framework will be mandatory.